Installed Building Products, Inc.'s (NYSE:IBP) price-to-earnings (or "P/E") ratio of 19.9x 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. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.
With its earnings growth in positive territory compared to the declining earnings of most other companies, Installed Building Products has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.
Check out our latest analysis for Installed Building Products
NYSE:IBP Price to Earnings Ratio vs Industry January 8th 2024 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.
Does Growth Match The High P/E?
The only time you'd be truly comfortable seeing a P/E as high as Installed Building Products' is when the company's growth is on track to outshine the market.
Retrospectively, the last year delivered an exceptional 38% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 193% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.
Shifting to the future, estimates from the twelve analysts covering the company suggest earnings growth is heading into negative territory, declining 1.1% over the next year. Meanwhile, the broader market is forecast to expand by 9.9%, which paints a poor picture.
With this information, we find it concerning that Installed Building Products is trading at a P/E higher than the market. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a very good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the negative growth outlook.
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.
Our examination of Installed Building Products' analyst forecasts revealed that its outlook for shrinking earnings isn't impacting its high P/E anywhere near as much as we would have predicted. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings are highly unlikely to support such positive sentiment for long. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.
Before you settle on your opinion, we've discovered 2 warning signs for Installed Building Products that you should be aware of.
If these risks are making you reconsider your opinion on Installed Building Products, explore our interactive list of high quality stocks to get an idea of what else is out there.
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Installed Building Products, Inc.(NYSE:IBP)の19.9倍のP/E倍率は、アメリカ市場のP/E倍率が16倍以下の企業が半数近く存在する中では、売却するように見えるかもしれません。さらに、P/E倍率が9倍以下の企業もかなり一般的です。それにもかかわらず、P/E倍率が高い理由を判断するためには、少し深く掘り下げる必要があります。
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オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。