Unlimited Travel Group UTG AB (publ) (STO:UTG) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it’s encouraging to see the stock is up 47% in the last year.
Even after such a large jump in price, Unlimited Travel Group UTG may still be sending very bullish signals at the moment with its price-to-earnings (or “P/E”) ratio of 11.3x, since almost half of all companies in Sweden have P/E ratios greater than 23x and even P/E’s higher than 42x are not unusual. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
For instance, Unlimited Travel Group UTG’s receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is low because investors think the company won’t do enough to avoid underperforming the broader market in the near future. If you like the company, you’d be hoping this isn’t the case so that you could potentially pick up some stock while it’s out of favour.
Check out our latest analysis for Unlimited Travel Group UTG
We don’t have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Unlimited Travel Group UTG’s earnings, revenue and cash flow.
How Is Unlimited Travel Group UTG’s Growth Trending?
The only time you’d be truly comfortable seeing a P/E as depressed as Unlimited Travel Group UTG’s is when the company’s growth is on track to lag the market decidedly.
Taking a look back first, the company’s earnings per share growth last year wasn’t something to get excited about as it posted a disappointing decline of 14%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it’s fair to say that earnings growth has been inconsistent recently for the company.
Weighing that recent medium-term earnings trajectory against the broader market’s one-year forecast for expansion of 27% shows it’s noticeably less attractive on an annualised basis.
In light of this, it’s understandable that Unlimited Travel Group UTG’s P/E sits below the majority of other companies. Apparently many shareholders weren’t comfortable holding on to something they believe will continue to trail the bourse.
The Bottom Line On Unlimited Travel Group UTG’s P/E
Even after such a strong price move, Unlimited Travel Group UTG’s P/E still trails the rest of the market significantly. While the price-to-earnings ratio shouldn’t be the defining factor in whether you buy a stock or not, it’s quite a capable barometer of earnings expectations.
As we suspected, our examination of Unlimited Travel Group UTG revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won’t provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
Having said that, be aware Unlimited Travel Group UTG is showing 2 warning signs in our investment analysis, you should know about.
You might be able to find a better investment than Unlimited Travel Group UTG. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
Valuation is complex, but we’re helping make it simple.
Find out whether Unlimited Travel Group UTG is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.