Yahoo Finance United Parcel Service, Inc.'s (NYSE:UPS) Shares May Have Run Too Fast Too Soon
With a median price-to-earnings (or "P/E") ratio of close to 15x in the United States, you could be forgiven for feeling indifferent about United Parcel Service, Inc.'s (NYSE:UPS) P/E ratio of 13.9x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
Recent times have been advantageous for United Parcel Service as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
See our latest analysis for United Parcel Service
If you'd like to see what analysts are forecasting going forward, you should check out our free report on United Parcel Service.
What Are Growth Metrics Telling Us About The P/E?
United Parcel Service's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.
Retrospectively, the last year delivered an exceptional 73% gain to the company's bottom line. The latest three year period has also seen an excellent 124% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 1.2% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the market is forecast to expand by 9.0% per annum, which is noticeably more attractive.
In light of this, it's curious that United Parcel Service's P/E sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.
The Bottom Line On United Parcel Service'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.
Our examination of United Parcel Service's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. Unless these conditions improve, it's challenging to accept these prices as being reasonable.
Before you settle on your opinion, we've discovered 2 warning signs for United Parcel Service (1 is significant!) that you should be aware of.
Of course, you might also be able to find a better stock than United Parcel Service. So you may wish to see this free collection of other companies that sit on P/E's below 20x and have grown earnings strongly.
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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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