It's not a stretch to say that OGE Energy Corp.'s (NYSE:OGE) price-to-earnings (or "P/E") ratio of 16.8x right now seems quite "middle-of-the-road" compared to the market in the United States, where the median P/E ratio is around 17x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
With earnings that are retreating more than the market's of late, OGE Energy has been very sluggish. It might be that many expect the dismal earnings performance to revert back to market averages soon, which has kept the P/E from falling. 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 it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.
See our latest analysis for OGE Energy
NYSE:OGE Price to Earnings Ratio vs Industry December 26th 2023 Want the full picture on analyst estimates for the company? Then our free report on OGE Energy will help you uncover what's on the horizon.
Is There Some Growth For OGE Energy?
There's an inherent assumption that a company should be matching the market for P/E ratios like OGE Energy's 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 55%. 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. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.
Turning to the outlook, the next three years should generate growth of 4.1% each year as estimated by the six analysts watching the company. That's shaping up to be materially lower than the 13% per year growth forecast for the broader market.
With this information, we find it interesting that OGE Energy is trading at a fairly similar P/E to the market. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.
The Key Takeaway
Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've established that OGE Energy currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.
You should always think about risks. Case in point, we've spotted 3 warning signs for OGE Energy you should be aware of, and 1 of them doesn't sit too well with us.
It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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.
说OGE Energy Corp. 这并不夸张s(纽约证券交易所代码:OGE)市盈率(或 “市盈率”)目前为16.8倍,与美国市场相比,市盈率中位数约为17倍,似乎相当 “中间路段”。尽管这可能不会引起任何关注,但如果市盈率不合理,投资者可能会错过潜在的机会或无视迫在眉睫的失望。
OGE Energy的收益比最近的市场回落幅度更大,因此一直非常疲软。许多人可能预计,惨淡的收益表现将很快恢复到市场平均水平,这阻止了市盈率的下降。如果你仍然相信公司的业务,你宁愿公司不流失收益。或者,至少,如果你的计划是在股市不利的情况下买入一些股票,你会希望它不会一直表现不佳。