Not much has changed with NetEnt since January. The powerhouse continues to grow impressively, with lots of wind at its back, extremely confident and slick executive management, exciting products, and it’s still situated on dangerous fault lines. The question with NetEnt is as it has been for some time now. That is, not whether it is a good company, but whether its valuation is too high and already priced for the rapid growth that it has been experiencing for years.

Since the beginning of 2012, NetEnt shares have increased by an enviable 710% while the top line has increased 142% and the bottom line 223%. The fact that shares are outpacing top line growth by a factor of 5 and bottom line growth by a factor of 3.2 is not itself worrying, as growth stocks like NetEnt almost always rise faster than the actual growth of the company’s earnings. The question is how much faster than proportional is warranted, and in an environment like Sweden’s that is a very hard question to answer.

Part of it is investors pricing in future growth, which is understandable. But another part of it is Sweden’s ultra loose monetary policy that has actually gotten even looser since we last covered this stock in January. See Swedish interest rates, negative in January 2016, even more negative now:

Negative interest rates force investors to take money out of banks and to put that money anywhere (literally anywhere) where it will not be eaten away by time. If any of us had our money in a Swedish bank we’d all be chasing the best companies just so our deposits will not shrink over time due to crazy Riksbank policy. So the question is, if interest rates were normal in Sweden, and if not normal at least above zero for heaven’s sake, then how much would NetEnt shares have outpaced the company’s growth? Perhaps by a factor 3 top line and 2 bottom line instead of 5 and 3.2? These are all numbers out of a hat and there is no way to know, which is why buying any more NetEnt stock now is a gamble on how much longer the Riksbank can maintain negative interest rates. Gambling is for punters, not investors. It’s fine to do both separately, but  it is unwise to mix the two into the same endeavor.