Acushnet Holdings Corp. (NYSE:GOLF) Not Lagging Market On Growth Or Pricing
When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 18x, you may consider Acushnet Holdings Corp. (NYSE:GOLF) as a stock to avoid entirely with its 44.6x 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.
With earnings that are retreating more than the market's of late, Acushnet Holdings has been very sluggish. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.
See our latest analysis for Acushnet Holdings
Want the full picture on analyst estimates for the company? Then our free report on Acushnet Holdings will help you uncover what's on the horizon.
Does Growth Match The High P/E?
There's an inherent assumption that a company should far outperform the market for P/E ratios like Acushnet Holdings' to be considered reasonable.
Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 36%. The last three years don't look nice either as the company has shrunk EPS by 31% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
Turning to the outlook, the next three years should generate growth of 30% each year as estimated by the eleven analysts watching the company. With the market only predicted to deliver 13% each year, the company is positioned for a stronger earnings result.
In light of this, it's understandable that Acushnet Holdings' 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 Final Word
The price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
As we suspected, our examination of Acushnet Holdings' 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. It's hard to see the share price falling strongly in the near future under these circumstances.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Acushnet Holdings (at least 1 which doesn't sit too well with us), and understanding these should be part of your investment process.
Of course, you might also be able to find a better stock than Acushnet Holdings. 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.
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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