Installed Building Products, Inc.'s (NYSE:IBP) price-to-earnings (or "P/E") ratio of 24.2x might make it look like a sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 16x and even P/E's below 9x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.
Installed Building Products certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors' willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Keen to find out how analysts think Installed Building Products' future stacks up against the industry? In that case, our free report is a great place to start.
Is There Enough Growth For Installed Building Products?
Installed Building Products' P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.
If we review the last year of earnings growth, the company posted a worthy increase of 5.6%. Pleasingly, EPS has also lifted 164% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.
Turning to the outlook, the next year should generate growth of 12% as estimated by the twelve analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 12%, which is not materially different.
In light of this, it's curious that Installed Building Products' P/E sits above the majority of other companies. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for disappointment if the P/E falls to levels more in line with the growth outlook.
What We Can Learn From Installed Building Products' P/E?
We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Our examination of Installed Building Products' analyst forecasts revealed that its market-matching earnings outlook isn't impacting its high P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we suspect the share price is at risk of declining, sending the high P/E lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
You should always think about risks. Case in point, we've spotted 2 warning signs for Installed Building Products you should be aware of.
If you're unsure about the strength of Installed Building Products' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Installed Building Products, Inc.(紐交所:IBP)的市盈率(或 "P/E")爲24.2倍,與美國市場半數公司的市盈率(低於16倍)和甚至低於9倍的市盈率相比,似乎是一個賣出的股票。 然而,市盈率可能存在某些原因,並需要進一步調查以確定是否合理。
Installed Building Products最近確實表現得不錯,因爲其盈利增長保持爲正,而大多數其他公司的盈利卻在倒退。看起來,許多人都期望該公司繼續對抗整個市場的逆境,這增加了投資者爲該公司的股票付出高昂價格的意願。很希望如此,否則您將因爲毫無特定原因而支付了一個相當龐大的價格。
想知道分析師如何看待Installed Building Products未來與行業的競爭?在這種情況下,我們的免費報告是一個很好的起點。
Installed Building Products是否有足夠的成長空間?
Installed Building Products的市盈率對於預計實現穩定增長並表現優於市場的公司來說很典型。
考慮到這一點,Installed Building Products的市盈率高於其他大多數公司,這似乎有些奇怪。似乎大多數投資者忽略了這些只能平凡增長的預期,並且願意爲這隻股票支付高價。如果市盈率下跌並接近該公司的成長預期,這些股東可能會讓自己失望。
從Installed Building Products的市盈率中我們可以學到什麼?
我們會說市盈率的力量不是作爲估值工具,而是用於衡量當前投資者的情緒和未來預期。
我們對Installed Building Products的分析師預測進行檢測後發現,市場匹配的盈利前景並沒有像我們預計的那樣影響到其高市盈率。當我們看到市場前景普通的平均盈利增長時,我們懷疑股價面臨着下降風險,並且高市盈率也會隨之下降。這將使股東的投資面臨風險,而潛在投資者則面臨支付不必要溢價的風險。
你應該始終考慮風險。例如,我們發現Installed Building Products存在2個警示信號,您應該注意。
如果您對Installed Building Products的業務實力不確定,爲什麼不探索我們的互動型股票列表,以查看其他您可能錯過的公司具有穩健的業務基礎。