MPL Verbum S.A.'s (WSE:VER) 30% Dip Still Leaving Some Shareholders Feeling Restless Over Its P/ERatio

Simply Wall St · 2d ago

MPL Verbum S.A. (WSE:VER) shares have had a horrible month, losing 30% after a relatively good period beforehand. The last month has meant the stock is now only up 9.8% during the last year.

Although its price has dipped substantially, MPL Verbum's price-to-earnings (or "P/E") ratio of 20.5x might still make it look like a strong sell right now compared to the market in Poland, where around half of the companies have P/E ratios below 12x and even P/E's below 7x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

Our free stock report includes 2 warning signs investors should be aware of before investing in MPL Verbum. Read for free now.

The earnings growth achieved at MPL Verbum over the last year would be more than acceptable for most companies. One possibility is that the P/E is high because investors think this respectable earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

See our latest analysis for MPL Verbum

pe-multiple-vs-industry
WSE:VER Price to Earnings Ratio vs Industry April 16th 2025
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 MPL Verbum's earnings, revenue and cash flow.

How Is MPL Verbum's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like MPL Verbum's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 16% gain to the company's bottom line. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 8.6% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

In contrast to the company, the rest of the market is expected to grow by 9.2% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

With this information, we find it concerning that MPL Verbum is trading at a P/E higher than the market. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

The Final Word

A significant share price dive has done very little to deflate MPL Verbum's very lofty P/E. 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.

Our examination of MPL Verbum revealed its shrinking earnings over the medium-term aren't impacting its high P/E anywhere near as much as we would have predicted, given the market is set to grow. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

You should always think about risks. Case in point, we've spotted 2 warning signs for MPL Verbum you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.