SM Energy Company's (NYSE:SM) price-to-earnings (or "P/E") ratio of 5.2x 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 SM Energy as its earnings have been falling quicker than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.
View our latest analysis for SM Energy
NYSE:SM Price to Earnings Ratio vs Industry January 26th 2024 Keen to find out how analysts think SM Energy's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Any Growth For SM Energy?
There's an inherent assumption that a company should far underperform the market for P/E ratios like SM Energy's to be considered reasonable.
Retrospectively, the last year delivered a frustrating 34% decrease to the company's bottom line. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Shifting to the future, estimates from the ten analysts covering the company suggest earnings growth is heading into negative territory, declining 15% over the next year. Meanwhile, the broader market is forecast to expand by 10%, which paints a poor picture.
In light of this, it's understandable that SM Energy'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 SM Energy's P/E?
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.
As we suspected, our examination of SM Energy'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.
Before you settle on your opinion, we've discovered 1 warning sign for SM Energy that you should be aware of.
You might be able to find a better investment than SM Energy. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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與美國市場相比,SM Energy Company(紐約證券交易所代碼:SM)的市盈率(或 “市盈率”)爲5.2倍,這可能使其看起來像是一個強勁的買盤。在美國,約有一半的公司的市盈率超過17倍,甚至市盈率超過33倍也很常見。但是,市盈率可能很低是有原因的,需要進一步調查以確定其是否合理。