The KION GROUP (ETR:KGX) share price has done well in the last month, posting a gain of 31%. And the full year gain of 12% isn't too shabby, either!

All else being equal, a sharp share price increase should make a stock less attractive to potential investors. While the market sentiment towards a stock is very changeable, in the long run, the share price will tend to move in the same direction as earnings per share. The implication here is that deep value investors might steer clear when expectations of a company are too high. Perhaps the simplest way to get a read on investors' expectations of a business is to look at its Price to Earnings Ratio (PE Ratio). A high P/E ratio means that investors have a high expectation about future growth, while a low P/E ratio means they have low expectations about future growth.

View our latest analysis for KION GROUP

Does KION GROUP Have A Relatively High Or Low P/E For Its Industry?

KION GROUP's P/E is 14.42. As you can see below KION GROUP has a P/E ratio that is fairly close for the average for the machinery industry, which is 13.9.

That indicates that the market expects KION GROUP will perform roughly in line with other companies in its industry. If the company has better than average prospects, then the market might be underestimating it. I would further inform my view by checking insider buying and selling., among other things.

How Growth Rates Impact P/E Ratios

Probably the most important factor in determining what P/E a company trades on is the earnings growth. If earnings are growing quickly, then the 'E' in the equation will increase faster than it would otherwise. And in that case, the P/E ratio itself will drop rather quickly. Then, a lower P/E should attract more buyers, pushing the share price up.

It's great to see that KION GROUP grew EPS by 11% in the last year. And earnings per share have improved by 19% annually, over the last five years. With that performance, you might expect an above average P/E ratio.

Remember: P/E Ratios Don't Consider The Balance Sheet

The 'Price' in P/E reflects the market capitalization of the company. So it won't reflect the advantage of cash, or disadvantage of debt. Hypothetically, a company could reduce its future P/E ratio by spending its cash (or taking on debt) to achieve higher earnings.

Such spending might be good or bad, overall, but the key point here is that you need to look at debt to understand the P/E ratio in context.

KION GROUP's Balance Sheet

KION GROUP has net debt equal to 35% of its market cap. You'd want to be aware of this fact, but it doesn't bother us.