Tri Pointe Homes, Inc.'s (NYSE:TPH) 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 17x and even P/E's above 32x 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.
Tri Pointe Homes has been struggling lately as its earnings have declined faster 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. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Tri Pointe Homes will help you uncover what's on the horizon.
How Is Tri Pointe Homes' Growth Trending?
There's an inherent assumption that a company should underperform the market for P/E ratios like Tri Pointe Homes' to be considered reasonable.
Retrospectively, the last year delivered a frustrating 38% decrease to the company's bottom line. Even so, admirably EPS has lifted 64% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.
Shifting to the future, estimates from the six analysts covering the company suggest earnings should grow by 12% each year over the next three years. That's shaping up to be similar to the 10% per annum growth forecast for the broader market.
In light of this, it's peculiar that Tri Pointe Homes' P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
The Bottom Line On Tri Pointe Homes' P/E
While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.
We've established that Tri Pointe Homes currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.
Before you take the next step, you should know about the 1 warning sign for Tri Pointe Homes that we have uncovered.
If you're unsure about the strength of Tri Pointe Homes' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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Tri Pointe Homes, Inc. 's(紐約證券交易所代碼:TPH)市盈率(或 “市盈率”)爲10.3倍,與美國市場相比,目前可能看起來像買入。在美國,約有一半公司的市盈率高於17倍,甚至市盈率高於32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。
Tri Pointe Homes最近一直處於困境,因爲其收益的下降速度快於大多數其他公司。市盈率可能很低,因爲投資者認爲這種糟糕的收益表現根本不會改善。如果你仍然喜歡這家公司,那麼在做出任何決定之前,你會希望其盈利軌跡得到扭轉。如果不是,那麼現有股東可能很難對股價的未來走向感到興奮。