Tri Pointe Homes, Inc.'s (NYSE:TPH) price-to-earnings (or "P/E") ratio of 9.3x 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. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.
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.
What Are Growth Metrics Telling Us About The Low P/E?
In order to justify its P/E ratio, Tri Pointe Homes would need to produce sluggish growth that's trailing the market.
Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 32%. Even so, admirably EPS has lifted 52% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.
Looking ahead now, EPS is anticipated to climb by 24% during the coming year according to the six analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 12%, which is noticeably less attractive.
With this information, we find it odd that Tri Pointe Homes is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Key Takeaway
Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
We've established that Tri Pointe Homes currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.
You always need to take note of risks, for example - Tri Pointe Homes has 1 warning sign we think you should be aware of.
If these risks are making you reconsider your opinion on Tri Pointe Homes, explore our interactive list of high quality stocks to get an idea of what else is out there.
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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
Tri Pointe Homes, Inc(NYSE:TPH)的市盈率(P/E)比爲9.3倍,與美國市場上大約一半公司的P/E比率高於17倍,甚至有超過32倍的情況相比,現在看起來似乎很值得購買。儘管如此,我們仍需要深入挖掘一下,以確定其降低P/E比率的合理依據。
Tri Pointe Homes最近表現不佳,其盈利下降速度比大多數其他公司快。許多人似乎預期失望的盈利表現將繼續下去,這就壓制了P/E比率。如果您仍然喜歡該公司,您需要期待其盈利軌跡在做出任何決定之前扭轉,或者至少希望其盈利下滑不會變得更糟,而您的計劃是在股票不受青睞的情況下購買一些股票。