Yahoo Finance Hibbett Sports, Inc.'s (NASDAQ:HIBB) Subdued P/E Might Signal An Opportunity
With a price-to-earnings (or "P/E") ratio of 16.5x Hibbett Sports, Inc. (NASDAQ:HIBB) may be sending bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 20x and even P/E's higher than 39x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
Hibbett Sports certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
See our latest analysis for Hibbett Sports
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Hibbett Sports.
How Is Hibbett Sports' Growth Trending?
The only time you'd be truly comfortable seeing a P/E as low as Hibbett Sports' is when the company's growth is on track to lag the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 31% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 4.8% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
Looking ahead now, EPS is anticipated to climb by 53% during the coming year according to the three analysts following the company. With the market only predicted to deliver 5.2%, the company is positioned for a stronger earnings result.
In light of this, it's peculiar that Hibbett Sports' P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
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 Hibbett Sports currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.
Before you settle on your opinion, we've discovered 2 warning signs for Hibbett Sports that you should be aware of.
If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.
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. 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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