The Interpublic Group of Companies, Inc.'s (NYSE:IPG) price-to-earnings (or "P/E") ratio of 10.3x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 18x and even P/E's above 33x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.
Recent times have been pleasing for Interpublic Group of Companies as its earnings have risen in spite of the market's earnings going into reverse. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Keen to find out how analysts think Interpublic Group of Companies' future stacks up against the industry? In that case, our free report is a great place to start.
How Is Interpublic Group of Companies' Growth Trending?
Interpublic Group of Companies' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.
If we review the last year of earnings growth, the company posted a terrific increase of 22%. The latest three year period has also seen an excellent 156% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.
Turning to the outlook, the next three years should generate growth of 0.8% per year as estimated by the eight analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 10% per annum, which is noticeably more attractive.
With this information, we can see why Interpublic Group of Companies is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
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.
We've established that Interpublic Group of Companies maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Interpublic Group of Companies with six simple checks will allow you to discover any risks that could be an issue.
Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
与美国市场相比,The Interpublic Group of Companies, Inc. (NYSE:IPG) 的市盈率为10.3x,可能看起来像是一个买入时机,因为有一半左右的公司的市盈率超过18倍,甚至市盈率超过33倍的公司很常见。然而,我们需要深入挖掘,以确定这种降低的市盈率是否有合理的基础。
尽管市场收益率出现逆转,但最近一段时间对 Interpublic Group of Companies 来说是令人愉悦的,因为其收益增长了。许多人可能认为强劲的收益表现可能会大幅下降,可能比市场更长时间,这可能压制了市盈率。如果不是这样,那么现有股东有理由对股票的未来走势非常乐观。
想知道分析师们如何看待 Interpublic Group of Companies 的未来与行业相比?那么,我们的免费报告是一个很好的起点。
Interpublic Group of Companies 的增长趋势如何?
Interpublic Group of Companies 的市盈率对于一个只有有限增长预期且表现不如市场的公司来说是典型的。