Not Many Are Piling Into Ranger Oil Corporation (NASDAQ:ROCC) Just Yet
With a price-to-earnings (or "P/E") ratio of 3.8x Ranger Oil Corporation (NASDAQ:ROCC) may be sending very bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 16x and even P/E's higher than 31x 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 limited.
With earnings growth that's superior to most other companies of late, Ranger Oil 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
View our latest analysis for Ranger Oil
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Ranger Oil.
Is There Any Growth For Ranger Oil?
There's an inherent assumption that a company should far underperform the market for P/E ratios like Ranger Oil's to be considered reasonable.
Taking a look back first, we see that the company grew earnings per share by an impressive 347% last year. The strong recent performance means it was also able to grow EPS by 146% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Turning to the outlook, the next year should generate growth of 25% as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 4.6% growth forecast for the broader market.
With this information, we find it odd that Ranger Oil 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.
The Bottom Line On Ranger Oil's P/E
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 Ranger Oil currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.
It is also worth noting that we have found 1 warning sign for Ranger Oil that you need to take into consideration.
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 P/E below 20x.
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
