Not Many Are Piling Into Esperion Therapeutics, Inc. (NASDAQ:ESPR) Stock Yet As It Plummets 28%
Esperion Therapeutics, Inc. (NASDAQ:ESPR) shares have had a horrible month, losing 28% after a relatively good period beforehand. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 75% loss during that time.
Following the heavy fall in price, Esperion Therapeutics' price-to-earnings (or "P/E") ratio of -0.5x might make it look like a strong buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 16x and even P/E's above 31x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.
With earnings growth that's superior to most other companies of late, Esperion Therapeutics has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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.
See our latest analysis for Esperion Therapeutics
Keen to find out how analysts think Esperion Therapeutics' future stacks up against the industry? In that case, our free report is a great place to start.
What Are Growth Metrics Telling Us About The Low P/E?
There's an inherent assumption that a company should far underperform the market for P/E ratios like Esperion Therapeutics' to be considered reasonable.
If we review the last year of earnings growth, the company posted a terrific increase of 46%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 51% over the next year. That's shaping up to be materially higher than the 5.7% growth forecast for the broader market.
In light of this, it's peculiar that Esperion Therapeutics' P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
What We Can Learn From Esperion Therapeutics' P/E?
Esperion Therapeutics' P/E looks about as weak as its stock price lately. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
Our examination of Esperion Therapeutics' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. 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 - Esperion Therapeutics has 4 warning signs (and 3 which make us uncomfortable) we think you should know about.
Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.
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.
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