Moonpig Group PLC (LON:MOON) Looks Just Right With A 27% Price Jump

Simply Wall St · 10/17 05:06

The Moonpig Group PLC (LON:MOON) share price has done very well over the last month, posting an excellent gain of 27%. Looking back a bit further, it's encouraging to see the stock is up 63% in the last year.

After such a large jump in price, Moonpig Group may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 25.9x, since almost half of all companies in the United Kingdom have P/E ratios under 16x and even P/E's lower than 9x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Moonpig Group certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Moonpig Group

pe-multiple-vs-industry
LSE:MOON Price to Earnings Ratio vs Industry October 17th 2024
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Moonpig Group.

Is There Enough Growth For Moonpig Group?

Moonpig Group's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 27% last year. The latest three year period has also seen an excellent 62% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the ten analysts covering the company suggest earnings should grow by 23% per annum over the next three years. Meanwhile, the rest of the market is forecast to only expand by 13% per year, which is noticeably less attractive.

In light of this, it's understandable that Moonpig Group's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Moonpig Group's P/E

Moonpig Group's P/E is flying high just like its stock has during the last month. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Moonpig Group maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

You always need to take note of risks, for example - Moonpig Group has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on Moonpig Group, explore our interactive list of high quality stocks to get an idea of what else is out there.