European links behind success of fashion retailer Esprit is too dependent on growth in Europe and euro gains for its earnings.

(From South China Morning Post)

Esprit, French for liveliness of mind or spirit, has certainly cut a dash as the Hong Kong-listed fashion retailer again beat predictions with strong results. Even the most bullish of market forecasts appeared to be surpassed and the share price did not disappoint, reaching new highs - now doubling in the past two years.

But with a high share price comes a demanding forward price-earnings ratio of more than 20 times, especially so when controlling shareholders have now cashed out more than $2 billion of shares in the past nine months - the latest after the 2004 interim results. Are things really as good as they seem?

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