When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 17x, you may consider Quanex Building Products Corporation (NYSE:NX) as an attractive investment with its 11.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.
The earnings growth achieved at Quanex Building Products over the last year would be more than acceptable for most companies. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Quanex Building Products will help you shine a light on its historical performance.
Is There Any Growth For Quanex Building Products?
In order to justify its P/E ratio, Quanex Building Products would need to produce sluggish growth that's trailing the market.
Taking a look back first, we see that the company managed to grow earnings per share by a handy 9.5% last year. Pleasingly, EPS has also lifted 46% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Comparing that to the market, which is predicted to deliver 12% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised earnings results.
In light of this, it's peculiar that Quanex Building Products' P/E sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.
The Key Takeaway
We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Our examination of Quanex Building Products revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.
The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Quanex Building Products with six simple checks on some of these key factors.
Of course, you might also be able to find a better stock than Quanex Building Products. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
當美國近半數公司市盈率(或“P / E”)超過17倍時,您可以考慮Quanex Building Products Corporation(紐交所:NX)具有11.3倍市盈率的吸引人的投資。但是,我們需要深入挖掘,以確定減少的市盈率是否有合理的基礎。
在Quanex Building Products過去一年中實現的盈利增長對於大多數公司來說都是可以接受的。一個可能性是,市盈率低,因爲投資者認爲這種可觀的盈利增長實際上可能在不久的將來表現不如更廣泛的市場。如果沒有這種情況出現,那麼現有股東有理由對股價的未來方向感到樂觀。
想要了解公司的盈利,收入和現金流的全貌嗎?那麼我們關於Quanex Building Products的免費報告將幫助您揭示其歷史表現。
鑑於此,奇怪的是Quanex Building Products的市盈率低於大多數其他公司。可能是因爲大多數投資者不相信該公司能夠繼續保持最近的增長率。
重要提示
我們會說市盈率的力量不是作爲估值工具,而是用於衡量當前投資者的情緒和未來預期。
我們對Quanex Building Products的檢查顯示,其三年收益趨勢對市盈率的貢獻不如預期,儘管它們看起來類似於當前的市場預期。當我們看到市場增長率類似並具有市場平均增長率的平均收益時,我們認爲潛在風險可能是對市盈率產生壓力的原因之一。如果最近的中期收益趨勢持續下去,至少價格下跌的風險似乎有所緩和,但投資者似乎認爲未來的收益可能會出現些許波動。
公司的資產負債表是風險分析的另一個關鍵領域。查看我們有關Quanex Building Products的免費資產負債表分析,進行一些關鍵因素的六項簡單檢查。
當然,您可能還能找到比Quanex Building Products更好的股票。因此,您可能希望查看這個具有合理市盈率並且盈利增長強勁的其他公司的免費收藏。