Northern Oil and Gas, Inc.'s (NYSE:NOG) price-to-earnings (or "P/E") ratio of 6.6x might make it look like a strong buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 19x and even P/E's above 34x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.
Northern Oil and Gas has been struggling lately as its earnings have declined faster than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Northern Oil and Gas will help you uncover what's on the horizon.
How Is Northern Oil and Gas' Growth Trending?
There's an inherent assumption that a company should far underperform the market for P/E ratios like Northern Oil and Gas' to be considered reasonable.
Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 61%. 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. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Turning to the outlook, the next three years should generate growth of 4.7% per year as estimated by the nine analysts watching the company. That's shaping up to be materially lower than the 10% each year growth forecast for the broader market.
In light of this, it's understandable that Northern Oil and Gas' P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
The Key Takeaway
It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
As we suspected, our examination of Northern Oil and Gas' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Northern Oil and Gas (at least 1 which can't be ignored), and understanding these should be part of your investment process.
If you're unsure about the strength of Northern Oil and Gas' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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.
紐交所公司Northern Oil and Gas, Inc.(NYSE:NOG)的市盈率爲6.6倍,與美國市場相比,這可能使其看起來像是一個強烈的買入機會,因爲大約一半的公司的市盈率超過19倍,甚至市盈率超過34倍的公司也很普遍。然而,市盈率可能之所以相當低,是有其原因的,需要進一步調查來判斷是否合理。
最近,Northern Oil and Gas的收益下降速度比大多數其他公司更快,因此該公司遭遇困難。很多人似乎預期令人沮喪的盈利表現會持續下去,這就壓制了市盈率。如果您仍然相信該業務,您肯定不希望該公司持續虧損。如果不是這樣,那麼現有股東可能會很難對股價的未來方向感到興奮。
想要全面了解對該公司的分析師預估嗎?那麼我們對Northern Oil and Gas的免費報告將幫助您了解未來的趨勢。
Northern Oil and Gas的增長趨勢如何?
人們普遍假設,像Northern Oil and Gas這樣的公司,其市盈率遠低於市場水平才被認爲是合理的。