Haypp Group AB (publ) (STO:HAYPP) Stocks Shoot Up 33% But Its P/E Still Looks Reasonable

Haypp Group AB (publ) (STO:HAYPP) shares have continued their recent momentum with a 33% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 38%.

After such a large jump in price, given close to half the companies in Sweden have price-to-earnings ratios (or "P/E's") below 21x, you may consider Haypp Group as a stock to avoid entirely with its 57.4x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

We check all companies for important risks. See what we found for Haypp Group in our free report.

Recent times have been advantageous for Haypp Group as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Haypp Group

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How Is Haypp Group's Growth Trending?

In order to justify its P/E ratio, Haypp Group would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 275% gain to the company's bottom line. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 90% during the coming year according to the sole analyst following the company. That's shaping up to be materially higher than the 26% growth forecast for the broader market.

With this information, we can see why Haypp Group is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Haypp Group's P/E

Haypp Group's P/E is flying high just like its stock has during the last month. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Haypp 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. It's hard to see the share price falling strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Haypp Group with six simple checks.

If you're unsure about the strength of Haypp Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.