With a median price-to-earnings (or "P/E") ratio of close to 17x in the United States, you could be forgiven for feeling indifferent about EnerSys' (NYSE:ENS) P/E ratio of 15.9x. 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.
With its earnings growth in positive territory compared to the declining earnings of most other companies, EnerSys has been doing quite well of late. It might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.
View our latest analysis for EnerSys
NYSE:ENS Price to Earnings Ratio vs Industry January 4th 2024 Want the full picture on analyst estimates for the company? Then our free report on EnerSys will help you uncover what's on the horizon.
What Are Growth Metrics Telling Us About The P/E?
In order to justify its P/E ratio, EnerSys would need to produce growth that's similar to the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 88% last year. The strong recent performance means it was also able to grow EPS by 163% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.
Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 35% over the next year. Meanwhile, the rest of the market is forecast to only expand by 10%, which is noticeably less attractive.
In light of this, it's curious that EnerSys' P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.
What We Can Learn From EnerSys' P/E?
Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
We've established that EnerSys currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.
Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for EnerSys with six simple checks.
It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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