Investors Still Waiting For A Pull Back In Oceaneering International, Inc. (NYSE:OII)
With a price-to-earnings (or "P/E") ratio of 70x Oceaneering International, Inc. (NYSE:OII) may be sending very bearish signals at the moment, given that almost half of all companies in the United States have P/E ratios under 15x and even P/E's lower than 7x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.
With earnings growth that's inferior to most other companies of late, Oceaneering International has been relatively sluggish. One possibility is that the P/E is high because investors think this lacklustre earnings performance will improve markedly. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
See our latest analysis for Oceaneering International
Keen to find out how analysts think Oceaneering International's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Enough Growth For Oceaneering International?
The only time you'd be truly comfortable seeing a P/E as steep as Oceaneering International's is when the company's growth is on track to outshine the market decidedly.
Retrospectively, the last year delivered virtually the same number to the company's bottom line as the year before. 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. So it seems apparent to us that the company has struggled to grow earnings meaningfully over that time.
Looking ahead now, EPS is anticipated to climb by 213% during the coming year according to the six analysts following the company. With the market only predicted to deliver 4.5%, the company is positioned for a stronger earnings result.
In light of this, it's understandable that Oceaneering International's 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.
What We Can Learn From Oceaneering International's 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 Oceaneering International maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. 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.
Before you take the next step, you should know about the 1 warning sign for Oceaneering International that we have uncovered.
If these risks are making you reconsider your opinion on Oceaneering International, explore our interactive list of high quality stocks to get an idea of what else is out there.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
