【marijuana strains for weight loss】What Is Parker-Hannifin's (NYSE:PH) P/E Ratio After Its Share Price Tanked?
To the annoyance of some shareholders,marijuana strains for weight loss
Parker-Hannifin
(
NYSE:PH
) shares are down a considerable 33% in the last month. Even longer term holders have taken a real hit with the stock declining 28% in the last year.
All else being equal, a share price drop should make a stock more attractive to potential investors. While the market sentiment towards a stock is very changeable, in the long run, the share price will tend to move in the same direction as earnings per share. So, on certain occasions, long term focussed investors try to take advantage of pessimistic expectations to buy shares at a better price. Perhaps the simplest way to get a read on investors' expectations of a business is to look at its Price to Earnings Ratio (PE Ratio). Investors have optimistic expectations of companies with higher P/E ratios, compared to companies with lower P/E ratios.
View our latest analysis for Parker-Hannifin
Does Parker-Hannifin Have A Relatively High Or Low P/E For Its Industry?
Parker-Hannifin's P/E of 12.17 indicates relatively low sentiment towards the stock. If you look at the image below, you can see Parker-Hannifin has a lower P/E than the average (15.5) in the machinery industry classification.
NYSE:PH Price Estimation Relative to Market April 1st 2020
This suggests that market participants think Parker-Hannifin will underperform other companies in its industry. Many investors like to buy stocks when the market is pessimistic about their prospects. It is arguably worth checking
if insiders are buying shares
, because that might imply they believe the stock is undervalued.
How Growth Rates Impact P/E Ratios
Generally speaking the rate of earnings growth has a profound impact on a company's P/E multiple. Earnings growth means that in the future the 'E' will be higher. Therefore, even if you pay a high multiple of earnings now, that multiple will become lower in the future. Then, a lower P/E should attract more buyers, pushing the share price up.
Parker-Hannifin had pretty flat EPS growth in the last year. But over the longer term (5 years) earnings per share have increased by 7.6%.
Don't Forget: The P/E Does Not Account For Debt or Bank Deposits
One drawback of using a P/E ratio is that it considers market capitalization, but not the balance sheet. That means it doesn't take debt or cash into account. Theoretically, a business can improve its earnings (and produce a lower P/E in the future) by investing in growth. That means taking on debt (or spending its cash).
Spending on growth might be good or bad a few years later, but the point is that the P/E ratio does not account for the option (or lack thereof).
Story continues
Parker-Hannifin's Balance Sheet
Parker-Hannifin's net debt is 52% of its market cap. If you want to compare its P/E ratio to other companies, you should absolutely keep in mind it has significant borrowings.
The Bottom Line On Parker-Hannifin's P/E Ratio
Parker-Hannifin trades on a P/E ratio of 12.2, which is fairly close to the US market average of 13.1. With significant debt and no EPS growth last year, the P/E suggests shareholders are expecting higher profit in the future. What can be absolutely certain is that the market has become significantly less optimistic about Parker-Hannifin over the last month, with the P/E ratio falling from 18.1 back then to 12.2 today. For those who prefer to invest with the flow of momentum, that might be a bad sign, but for a contrarian, it may signal opportunity.
When the market is wrong about a stock, it gives savvy investors an opportunity. As value investor Benjamin Graham famously said, 'In the short run, the market is a voting machine but in the long run, it is a weighing machine. So this
free
visual report on analyst forecasts
could hold the key to an excellent investment decision.
Of course,
you might find a fantastic investment by looking at a few good candidates.
So take a peek at this
free
list of companies with modest (or no) debt, trading on a P/E below 20.
If you spot an error that warrants correction, please contact the editor at
. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
View comments
相关文章:
- HealthEquity (HQY) Lags Q1 Earnings and Revenue Estimates
- Yellow Bird Producer Eiffel Mattsson Joins Nordic Drama Queens
- DXP Enterprises, Inc. (NASDAQ:DXPE): Time For A Financial Health Check
- There's A Lot To Like About Finolex Cables Limited's (NSE:FINCABLES) Upcoming 1.2% Dividend
- Albemarle: Q3 Earnings Insights
- Should You Reinvest Dividends?
- Lady Gaga Fires Back At Donald Trump’s Campaign After They Try To Turn Her Biden Support Into A Liability
- Should You Reinvest Dividends?
- HAGENS BERMAN, NATIONAL TRIAL ATTORNEYS, Encourages Crown Castle (CCI) Investors Who Have Suffered Losses to Contact its Attorneys: Securities Fraud Case Filed
- BRIEF-YFG Bhd Says Unit Accepted Letter Of Award
相关推荐:
- Trust Stamp Prepares to Pursue Direct Public Listing on Euronext Growth Market
- Axiom Prepaid Holdings Caps Off Banner Year with a Prestigious Accolade for Its CEO
- BRIEF-Qingdao Huijintong Power Equipment Wins State Grid's Bids For 218.0 Million Yuan
- Bitcoin touches record above $29,000, extending 2020 rally
- South African drugmaker Aspen sees no immediate impact of India's decision to curb drug exports
- Playtech to pay 28 million euros after Israeli tax audit
- Morning News Call - Canada, January 2
- BRIEF-China Eastern Airlines' Vice Chairman Resigns Due To Change In Job Role
- AUD/USD Weekly Price Forecast – Australian Dollar Rallies Significantly For The Week
- Public warned away from ship containers lost off Dutch coast
- What Can We Learn About FRP Holdings' (NASDAQ:FRPH) CEO Compensation?
- Italy opens borders ahead of neighbors, beckoning tourists
- Which Consumer Staples Stock Will Grow The Most By 2025?
- Blockchain Could Make Dismantling Nuclear Warheads More Secure: UK Report
- European Stocks Seen Higher; U.S. Election in Spotlight
- Backend Benchmarking Publishes 17th Edition of The Robo Report Covering the 3rd Quarter of 2020
- ESTA Announces Participation in the Goldman Sachs Global Healthcare Conference
- Nokia draws $560 million R&D loan for 5G
- ROCE Insights For Facebook
- Backend Benchmarking Publishes 17th Edition of The Robo Report Covering the 3rd Quarter of 2020