MRC Global Inc.'s (NYSE:MRC) price-to-earnings (or "P/E") ratio of 14.3x 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.
With its earnings growth in positive territory compared to the declining earnings of most other companies, MRC Global has been doing quite well of late. 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.
NYSE:MRC Price to Earnings Ratio vs Industry June 8th 2024 Want the full picture on analyst estimates for the company? Then our free report on MRC Global will help you uncover what's on the horizon.
What Are Growth Metrics Telling Us About The Low P/E?
The only time you'd be truly comfortable seeing a P/E as low as MRC Global's is when the company's growth is on track to lag the market.
If we review the last year of earnings growth, the company posted a worthy increase of 7.8%. However, due to its less than impressive performance prior to this period, EPS growth is practically non-existent over the last three years overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.
Looking ahead now, EPS is anticipated to climb by 8.7% each year during the coming three years according to the five analysts following the company. With the market predicted to deliver 9.9% growth per year, the company is positioned for a comparable earnings result.
In light of this, it's peculiar that MRC Global's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.
The Final Word
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 MRC Global 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.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with MRC Global, and understanding should be part of your investment process.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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相較於美國市場上有一半以上公司的市盈率超過17倍,甚至有些公司的市盈率超過32倍,MRC Global Inc.(紐交所:MRC)的市盈率爲14.3倍,目前看起來可能是一個不錯的買入機會。然而,我們需要深入挖掘,以確定市盈率的降低是否有合理的基礎。
與大多數其他公司的收益下降相比,MRC Global 的收益增長仍然保持在積極的區間內。一個可能的解釋是,市盈率之所以低,是因爲投資者認爲這家公司的收益會很快像其他公司一樣下降。如果不是這樣的話,那麼現有股東就有理由對未來股價的走勢感到非常樂觀。