When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 18x, you may consider Arcosa, Inc. (NYSE:ACA) as a stock to avoid entirely with its 30x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.
Recent times haven't been advantageous for Arcosa as its earnings have been falling quicker than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. If not, then existing shareholders may be very nervous about the viability of the share price.
NYSE:ACA Price to Earnings Ratio vs Industry August 29th 2024 Keen to find out how analysts think Arcosa's future stacks up against the industry? In that case, our free report is a great place to start.
What Are Growth Metrics Telling Us About The High P/E?
Arcosa's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.
Retrospectively, the last year delivered a frustrating 48% decrease to the company's bottom line. Still, the latest three year period has seen an excellent 86% overall rise in EPS, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.
Looking ahead now, EPS is anticipated to climb by 31% during the coming year according to the five analysts following the company. With the market only predicted to deliver 15%, the company is positioned for a stronger earnings result.
With this information, we can see why Arcosa is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
What We Can Learn From Arcosa's P/E?
Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've established that Arcosa maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.
Before you take the next step, you should know about the 1 warning sign for Arcosa that we have uncovered.
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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当美国将近一半的公司的市盈率低于18倍时,你可能会考虑完全避开Arcosa, Inc. (NYSE:ACA) 这只股票,因为它的市盈率达到了30倍。然而,市盈率可能之所以很高,是有其原因的,需要进一步调查以判断是否合理。