AGM Group Holdings Inc. (NASDAQ:AGMH) Shares Fly 28% But Investors Aren't Buying For Growth
AGM Group Holdings Inc. (NASDAQ:AGMH) shareholders have had their patience rewarded with a 28% share price jump in the last month. Unfortunately, despite the strong performance over the last month, the full year gain of 4.3% isn't as attractive.
Even after such a large jump in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 15x, you may still consider AGM Group Holdings as a highly attractive investment with its 2.8x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
For example, consider that AGM Group Holdings' financial performance has been pretty ordinary lately as earnings growth is non-existent. It might be that many expect the uninspiring earnings performance to worsen, which has repressed the P/E. 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 AGM Group Holdings
Although there are no analyst estimates available for AGM Group Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Does Growth Match The Low P/E?
The only time you'd be truly comfortable seeing a P/E as depressed as AGM Group Holdings' is when the company's growth is on track to lag the market decidedly.
If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. That's essentially a continuation of what we've seen over the last three years, as its EPS growth has been virtually non-existent for that entire period. Accordingly, shareholders probably wouldn't have been satisfied with the complete absence of medium-term growth.
This is in contrast to the rest of the market, which is expected to grow by 4.5% over the next year, materially higher than the company's recent medium-term annualised growth rates.
In light of this, it's understandable that AGM Group Holdings' P/E sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.
The Key Takeaway
AGM Group Holdings' recent share price jump still sees its P/E sitting firmly flat on the ground. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that AGM Group Holdings maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.
It is also worth noting that we have found 2 warning signs for AGM Group Holdings (1 makes us a bit uncomfortable!) that you need to take into consideration.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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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