ATI Inc. (NYSE:ATI) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 15% is also fairly reasonable.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about ATI's P/E ratio of 15.1x, since the median price-to-earnings (or "P/E") ratio in the United States is also close to 16x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
With its earnings growth in positive territory compared to the declining earnings of most other companies, ATI has been doing quite well of late. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
NYSE:ATI Price to Earnings Ratio vs Industry March 3rd 2024 Keen to find out how analysts think ATI's future stacks up against the industry? In that case, our free report is a great place to start.
How Is ATI's Growth Trending?
ATI's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 28% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.
Shifting to the future, estimates from the six analysts covering the company suggest earnings should grow by 2.8% per annum over the next three years. Meanwhile, the rest of the market is forecast to expand by 11% per year, which is noticeably more attractive.
In light of this, it's curious that ATI's P/E sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.
The Key Takeaway
Its shares have lifted substantially and now ATI's P/E is also back up to the market median. 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 ATI currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
Plus, you should also learn about these 2 warning signs we've spotted with ATI.
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).
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ATI Inc.(紐約證券交易所代碼:ATI)的股東們會很高興看到股價度過了一個愉快的月份,漲幅爲26%,並從先前的疲軟中恢復過來。從更廣泛的角度來看,儘管沒有上個月那麼強勁,但全年15%的漲幅也相當合理。