Yahoo Finance Helmerich & Payne, Inc.'s (NYSE:HP) Popularity With Investors Is Clear
With a price-to-earnings (or "P/E") ratio of 25.7x Helmerich & Payne, Inc. (NYSE:HP) may be sending very bearish signals at the moment, given that almost half of all companies in the United States have P/E ratios under 15x and even P/E's lower than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.
Helmerich & Payne could be doing better as it's been growing earnings less than most other companies lately. One possibility is that the P/E is high because investors think this lacklustre earnings performance will improve markedly. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Check out our latest analysis for Helmerich & Payne
Keen to find out how analysts think Helmerich & Payne's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Enough Growth For Helmerich & Payne?
Helmerich & Payne'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.
If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. That's essentially a continuation of what we've seen over the last three years, as its EPS growth has been virtually non-existent for that entire period. So it seems apparent to us that the company has struggled to grow earnings meaningfully over that time.
Looking ahead now, EPS is anticipated to climb by 47% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 9.8% per year, which is noticeably less attractive.
In light of this, it's understandable that Helmerich & Payne's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Key Takeaway
It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
As we suspected, our examination of Helmerich & Payne's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Helmerich & Payne, and understanding should be part of your investment process.
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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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.
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