Not Many Are Piling Into Pactiv Evergreen Inc. (NASDAQ:PTVE) Just Yet
When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 15x, you may consider Pactiv Evergreen Inc. (NASDAQ:PTVE) as an attractive investment with its 9.7x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
Recent times have been advantageous for Pactiv Evergreen as its earnings have been rising faster than most other companies. 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.
View our latest analysis for Pactiv Evergreen
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Pactiv Evergreen.
Is There Any Growth For Pactiv Evergreen?
Pactiv Evergreen's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.
If we review the last year of earnings growth, the company posted a terrific increase of 60%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 12% per annum during the coming three years according to the seven analysts following the company. With the market predicted to deliver 11% growth each year, the company is positioned for a comparable earnings result.
With this information, we find it odd that Pactiv Evergreen is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.
The Key Takeaway
Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've established that Pactiv Evergreen currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Pactiv Evergreen (1 is a bit unpleasant!) that you should be aware of before investing here.
Of course, you might also be able to find a better stock than Pactiv Evergreen. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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