With a price-to-earnings (or "P/E") ratio of 10.8x DHT Holdings, Inc. (NYSE:DHT) may be sending bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 17x and even P/E's higher than 32x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
Recent times have been pleasing for DHT Holdings as its earnings have risen in spite of the market's earnings going into reverse. 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:DHT Price to Earnings Ratio vs Industry July 3rd 2024 Keen to find out how analysts think DHT Holdings' future stacks up against the industry? In that case, our free report is a great place to start.
How Is DHT Holdings' Growth Trending?
DHT Holdings' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.
Retrospectively, the last year delivered an exceptional 47% gain to the company's bottom line. Still, incredibly EPS has fallen 17% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
Shifting to the future, estimates from the seven analysts covering the company suggest earnings should grow by 18% per annum over the next three years. That's shaping up to be materially higher than the 10% per year growth forecast for the broader market.
In light of this, it's peculiar that DHT Holdings' P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
What We Can Learn From DHT Holdings' P/E?
Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
We've established that DHT Holdings currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.
And what about other risks? Every company has them, and we've spotted 1 warning sign for DHT Holdings you should know about.
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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