Jack in the Box Inc.'s (NASDAQ:JACK) price-to-earnings (or "P/E") ratio of 11.3x 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.
Recent times have been advantageous for Jack in the Box as its earnings have been rising faster than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
See our latest analysis for Jack in the Box
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jack in the Box.
Does Growth Match The Low P/E?
In order to justify its P/E ratio, Jack in the Box would need to produce sluggish growth that's trailing the market.
If we review the last year of earnings growth, the company posted a terrific increase of 16%. The latest three year period has also seen an excellent 71% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Turning to the outlook, the next three years should generate growth of 8.1% per annum as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 13% each year, which is noticeably more attractive.
In light of this, it's understandable that Jack in the Box's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
The Final Word
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 Jack in the Box maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Jack in the Box (1 is a bit concerning) you should be aware of.
You might be able to find a better investment than Jack in the Box. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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.
Jack in the Box Inc.”s(纳斯达克股票代码:JACK)市盈率(或 “市盈率”)为11.3倍,与美国市场相比,目前可能看起来像买入。在美国,约有一半公司的市盈率高于17倍,甚至市盈率高于32倍也很常见。尽管如此,我们需要更深入地挖掘以确定降低市盈率是否有合理的基础。
最近对于 Jack in the Box 来说是有利的,因为其收益增长速度快于大多数其他公司。一种可能性是市盈率很低,因为投资者认为这种强劲的盈利表现今后可能不那么令人印象深刻。如果不是,那么现有股东就有理由对股价的未来走向非常乐观。