Option Care Health, Inc.'s (NASDAQ:OPCH) price-to-earnings (or "P/E") ratio of 25.2x might make it look like a sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 18x and even P/E's below 10x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.
Option Care Health has been struggling lately as its earnings have declined faster than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Keen to find out how analysts think Option Care Health's future stacks up against the industry? In that case, our free report is a great place to start.
What Are Growth Metrics Telling Us About The High P/E?
Option Care Health's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 9.0%. Still, the latest three year period has seen an excellent 365% overall rise in EPS, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.
Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 9.1% each year over the next three years. Meanwhile, the rest of the market is forecast to expand by 10% per annum, which is not materially different.
In light of this, it's curious that Option Care Health's P/E sits above the majority of other companies. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of earnings growth is likely to weigh down the share price eventually.
The Bottom Line On Option Care Health's P/E
Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
Our examination of Option Care Health's analyst forecasts revealed that its market-matching earnings outlook isn't impacting its high P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.
You always need to take note of risks, for example - Option Care Health has 2 warning signs we think you should be aware of.
Of course, you might also be able to find a better stock than Option Care Health. 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.
Option Care Health, Inc.(NASDAQ:OPCH)的市盈率爲25.2倍,與美國市場上大約一半的公司市盈率低於18倍,甚至低於10倍的情況相比,現在看起來可能是賣出的。然而,我們需要深入挖掘一下,以判斷這個較高的市盈率是否有合理的基礎。
option care health最近一直在經歷困境,因爲其收益下降的速度比大多數其他公司都要快。一個可能的原因是市盈率高是因爲投資者認爲該公司將徹底扭轉局面,超越市場上大多數其他公司。您真的希望是這樣,否則您將因爲沒有特別的理由而支付相當昂貴的價格。
想知道分析師如何看待option care health的未來與行業板塊的競爭?在這種情況下,我們的免費報告是一個很好的開始。
增長指標告訴我們關於高市盈率的什麼?
option care health的市盈率對於一家預期實現穩健增長,並且更重要的是表現優於市場的公司來說是典型的。