ACCO Brands Corporation (NYSE:ACCO) Doing What It Can To Lift Shares
When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 17x, you may consider ACCO Brands Corporation (NYSE:ACCO) as an attractive investment with its 9.5x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.
Recent times have been pleasing for ACCO Brands as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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 out of favour.
View our latest analysis for ACCO Brands
If you'd like to see what analysts are forecasting going forward, you should check out our free report on ACCO Brands.
What Are Growth Metrics Telling Us About The Low P/E?
In order to justify its P/E ratio, ACCO Brands would need to produce sluggish growth that's trailing the market.
Retrospectively, the last year delivered an exceptional 164% gain to the company's bottom line. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 25% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 33% over the next year. With the market only predicted to deliver 10%, the company is positioned for a stronger earnings result.
With this information, we find it odd that ACCO Brands is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
What We Can Learn From ACCO Brands' P/E?
While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.
We've established that ACCO Brands currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.
You need to take note of risks, for example - ACCO Brands has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
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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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.
