Oppenheimer Holdings Inc. (NYSE:OPY) Doing What It Can To Lift Shares
Oppenheimer Holdings Inc.'s (NYSE:OPY) price-to-earnings (or "P/E") ratio of 5.5x 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 19x and even P/E's above 38x 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.
Oppenheimer Holdings certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
See our latest analysis for Oppenheimer Holdings
Although there are no analyst estimates available for Oppenheimer Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Is There Any Growth For Oppenheimer Holdings?
There's an inherent assumption that a company should far underperform the market for P/E ratios like Oppenheimer Holdings' to be considered reasonable.
Retrospectively, the last year delivered an exceptional 53% gain to the company's bottom line. 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.
It's interesting to note that the rest of the market is similarly expected to grow by 0.5% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.
In light of this, it's peculiar that Oppenheimer Holdings' P/E sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.
The Final Word
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 Oppenheimer Holdings currently trades on a lower than expected P/E since its recent three-year growth is in line with the wider market forecast. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.
You should always think about risks. Case in point, we've spotted 1 warning sign for Oppenheimer Holdings you should be aware of.
If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.
This article by Simply Wall St is general in nature. 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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