Arcosa, Inc.'s (NYSE:ACA) price-to-earnings (or "P/E") ratio of 13.7x 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 17x 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 Arcosa as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Check out our latest analysis for Arcosa
NYSE:ACA Price to Earnings Ratio vs Industry December 18th 2023 If you'd like to see what analysts are forecasting going forward, you should check out our free report on Arcosa.
How Is Arcosa's Growth Trending?
There's an inherent assumption that a company should underperform the market for P/E ratios like Arcosa's to be considered reasonable.
Retrospectively, the last year delivered an exceptional 184% gain to the company's bottom line. Pleasingly, EPS has also lifted 142% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.
Turning to the outlook, the next year should bring diminished returns, with earnings decreasing 45% as estimated by the five analysts watching the company. Meanwhile, the broader market is forecast to expand by 10%, which paints a poor picture.
In light of this, it's understandable that Arcosa's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
What We Can Learn From Arcosa'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.
As we suspected, our examination of Arcosa'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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Arcosa (1 is significant) you should be aware of.
Of course, you might also be able to find a better stock than Arcosa. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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Arcosa, Inc. 's(紐約證券交易所代碼:ACA)市盈率(或 “市盈率”)爲13.7倍,與美國市場相比,目前可能看起來像買入,美國約有一半公司的市盈率高於17倍,甚至市盈率高於33倍也很常見。儘管如此,我們需要更深入地挖掘,以確定降低市盈率是否有合理的基礎。