Dillard's, Inc.'s (NYSE:DDS) price-to-earnings (or "P/E") ratio of 8.4x 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 17x and even P/E's above 33x 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.
Recent times haven't been advantageous for Dillard's as its earnings have been falling quicker than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.
View our latest analysis for Dillard's
NYSE:DDS Price to Earnings Ratio vs Industry January 1st 2024 Keen to find out how analysts think Dillard's' future stacks up against the industry? In that case, our free report is a great place to start.
Is There Any Growth For Dillard's?
In order to justify its P/E ratio, Dillard's would need to produce anemic growth that's substantially trailing the market.
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 9.0%. 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.
Shifting to the future, estimates from the four analysts covering the company suggest earnings growth is heading into negative territory, declining 35% over the next year. Meanwhile, the broader market is forecast to expand by 10%, which paints a poor picture.
With this information, we are not surprised that Dillard's is trading at a P/E lower than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.
The Bottom Line On Dillard's' P/E
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.
As we suspected, our examination of Dillard's' analyst forecasts revealed that its outlook for shrinking earnings 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.
Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Dillard's that you should be aware of.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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Dillard's, Inc. 's(纽约证券交易所代码:DDS)的市盈率(或 “市盈率”)为8.4倍,与美国市场相比,目前可能看起来像是一个强劲的买盘。在美国,约有一半公司的市盈率高于17倍,甚至市盈率超过33倍也很常见。但是,市盈率可能很低是有原因的,需要进一步调查以确定其是否合理。