EQT Corporation's (NYSE:EQT) price-to-earnings (or "P/E") ratio of 9.6x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 17x and even P/E's above 32x are quite common.  Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.  

Recent times haven't been advantageous for EQT as its earnings have been falling quicker than most other companies.   The P/E is probably low because investors think this poor earnings performance isn't going to improve at all.  You'd much rather the company wasn't bleeding earnings if you still believe in the business.  Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.    

NYSE:EQT Price to Earnings Ratio vs Industry April 24th 2024

Want the full picture on analyst estimates for the company? Then our free report on EQT will help you uncover what's on the horizon.  

What Are Growth Metrics Telling Us About The Low P/E?  

There's an inherent assumption that a company should underperform the market for P/E ratios like EQT's to be considered reasonable.  

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 4.8%.   Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time.  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 0.06% per year during the coming three years according to the ten analysts following the company.  That's shaping up to be materially lower than the 11% per annum growth forecast for the broader market.

In light of this, it's understandable that EQT's P/E sits below the majority of other companies.  Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.  

What We Can Learn From EQT's P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that EQT maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected.  Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises.  Unless these conditions improve, they will continue to form a barrier for the share price around these levels.    

We don't want to rain on the parade too much, but we did also find 2 warning signs for EQT that you need to be mindful of.  

If these risks are making you reconsider your opinion on EQT, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.