U.S. Markets closed

Should You Be Tempted To Sell Renishaw plc (LON:RSW) At Its Current PE Ratio?

Renishaw plc (LSE:RSW) is trading with a trailing P/E of 29.9x, which is higher than the industry average of 18x. Although some investors may jump to the conclusion that you should avoid the stock or sell if you own it, understanding the assumptions behind the P/E ratio might change your mind. In this article, I will break down what the P/E ratio is, how to interpret it and what to watch out for. See our latest analysis for Renishaw

What you need to know about the P/E ratio

The P/E ratio is a popular ratio used in relative valuation since earnings power is a key driver of investment value. By comparing a stock’s price per share to its earnings per share, we are able to see how much investors are paying for each pound of the company’s earnings.

P/E Calculation for RSW

Price-Earnings Ratio = Price per share ÷ Earnings per share

RSW Price-Earnings Ratio = £56.4 ÷ £1.889 = 29.9x

The P/E ratio itself doesn’t tell you a lot; however, it becomes very insightful when you compare it with other similar companies. We want to compare the stock’s P/E ratio to the average of companies that have similar characteristics as RSW, such as size and country of operation. One way of gathering a peer group is to use firms in the same industry, which is what I’ll do. RSW’s P/E of 29.9x is higher than its industry peers (18x), which implies that each dollar of RSW’s earnings is being overvalued by investors. Therefore, according to this analysis, RSW is an over-priced stock.

Assumptions to be aware of

Before you jump to the conclusion that RSW should be banished from your portfolio, it is important to realise that our conclusion rests on two assertions. The first is that our “similar companies” are actually similar to RSW, or else the difference in P/E might be a result of other factors. For example, if you compared lower risk firms with RSW, then investors would naturally value it at a lower price since it is a riskier investment. The second assumption that must hold true is that the stocks we are comparing RSW to are fairly valued by the market. If this does not hold true, RSW’s lower P/E ratio may be because firms in our peer group are overvalued by the market.

What this means for you:

You may have already conducted fundamental analysis on the stock as a shareholder, so its current overvaluation could signal a potential selling opportunity to reduce your exposure to RSW. Now that you understand the ins and outs of the PE metric, you should know to bear in mind its limitations before you make an investment decision. Remember that basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PE ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

1. Future Outlook: What are well-informed industry analysts predicting for RSW’s future growth? Take a look at our free research report of analyst consensus for RSW’s outlook.
2. Past Track Record: Has RSW been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of RSW’s historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

MarketWatch

Tesla will mark the beginning of the end for this bull market, warns Ralph Nader

Apparently so, according to consumer advocate and former presidential candidate Ralph Nader, who issued a stark warning this week, not only on the electric-car maker's pricey stock, but on the stock market as a whole. “Deep in debt, selling less than 400,000 vehicles last year and challenged by several competing electric car models in 2020, Tesla's stock valuation stunningly exceeds VW which sold over 10 million vehicles last year,” Nader added in a follow-up tweet. Of course, his stance didn't sit well with Tesla fans.

MarketWatch

Mark Cuban: Where the ‘frothy’ market goes from here depends on one thing

“Interest rates were a lot different back then,” he continued. A day earlier, fellow billionaire Paul Tudor Jones, from the sidelines of the World Economic Forum in Davos, said we are currently in the “craziest monetary and fiscal mix in history,” and, at least to him, it's reminiscent of 1999. What happens next in the stock market, he said, depends where interest rates go from here.

TipRanks

Goldman Sachs: These 3 Stocks Are Poised to Surge by at Least 15%

The stock analysts at Goldman Sachs have been busy. All of this is bread and butter for TipRanks, a platform that makes financial recommendations accountable, and expensive institutional datasets available, to all investors. Three tech stocks that usually fly under the radar – but Goldman sees them all with more than 15% upside potential in the coming year.

Chipmaker Intel Smashes Fourth-Quarter Targets, Guides Higher

Chipmaking giant Intel late Thursday smashed Wall Street's sales and earnings targets for the fourth quarter and gave an upbeat outlook for 2020. The Intel earnings report sent INTC stock surging in extended trading. Analysts expected Intel earnings of \$1.24 a share on sales of \$19.2 billion, according to Zacks Investment Research.

USA TODAY

FICO scores, the 'most important numbers in your financial life,' are about to change

Americans who fall behind on loan payments, rack up rising debt or take out personal loans to consolidate debt will likely see their credit scores fall under updates planned for the popular FICO scores, according to Fair Isaac Corp., the creator FICO scores. “Most consumers will see less than a 20-point swing in either direction,” David Shellenberger, FICO's vice president, product management, scores, said in a statement on Thursday. About 40 million, he said, will see a sharper shift upward in scores, and 40 million will be hit with a similar-sized drop, Shellenberger said.

• World
Associated Press Videos

Britain's Prince Charles appears to snub Pence

Britain's Prince Charles appeared to snub U.S. Vice President Mike Pence on Thursday during his arrival to the World Holocaust Forum event. Jan.

MarketWatch

Intel enjoys big rebound in cloud, but the future is still hazy

Intel Corp. wrapped up a rocky 2019 by reporting record sales thanks to a big jump in sales of chips for data centers and cloud computing, but that rebound may just be temporary. The chip giant reported Thursday that its quarterly revenue surged past \$20 billion for the first time ever at the end of 2019, fueled in part by a 19% jump in data center sales to \$7.2 billion in the fourth quarter, a record performance for Intel's (INTC) second largest business. The data center arena has been feast or famine for the entire chip industry, as the sporadic ups and downs of hyperscaler companies and public cloud service providers have created doubts about where the cloud boom is headed.

American City Business Journals

Wells Fargo former CEO John Stumpf fined \$17.5 million, banned for life from banking

Wells Fargo former Chairman and CEO John Stumpf has agreed to pay a fine of \$17.5 million and accept a lifetime ban from the banking industry in a settlement the Office of the Comptroller of the Currency announced Thursday. Hope Hardison, Wells Fargo's (NYSE: WFC) former chief administrative officer and director of corporate human resources, agreed to pay a fine of \$2.25 million and a personal cease and desist order that requires her to refrain from certain conduct in the future. The bank's former Chief Risk Officer Michael Loughlin will pay a fine of \$1.25 million and a personal cease and desist order.

American City Business Journals

FDA approves local biotech's first rare-cancer drug

The FDA has approved the first-ever commercial cancer treatment from Cambridge biotech Epizyme Inc. Just a few years ago, Epizyme had given up on its potential cancer treatment and sold it to a Japanese drug company. On Thursday, the FDA approved the drug, Tazverik, to treat metastatic or locally advanced epitheliod sarcoma, a rare and aggressive form of soft tissue cancer. Tazverik is the first drug specifically designed for the cancer, which is diagnosed in 150 to 200 people each year, according to Epizyme.

MarketWatch

I’m 38 with \$315,000 saved for retirement, but have \$30,000 in debt. Should I lower my 401(k) contributions to get rid of that debt?

Dear Catey, I currently have about \$315,000 in retirement savings and am 38 years old. I have about \$30,000 in consumer debt (this is the only debt we carry, no car payment or mortgage) — about \$24,000 of which is an unsecured loan that I'm paying about 10% interest on; the rest is on credit cards that are on a 0% promotional period and that I hopefully pay off before the 0% period expires in October 2020. I'm trying to pay down my debt and continue to save aggressively for retirement…I've made minimal improvements over the past couple of years paying down my debt and continue to play the balance transfer game on credit cards to retain 0% interest rates or other low rate options.

Bloomberg

Qorvo and Skyworks Weigh Bids for Broadcom’s RF Chip Unit

Semiconductor makers Qorvo Inc. and Skyworks Solutions Inc. are weighing bids for Broadcom Inc.

Surgical Robotics Leader Dives As Sales, Earnings Growth Decelerate

Surgical robotics giant Intuitive Surgical reported decelerating sales and earnings growth Thursday, leading ISRG stock to slide in after-hours trading. During the fourth quarter, Intuitive Surgical profit jumped nearly 18% to \$3.48 a share. Likewise, the surgical robotics company pulled in \$1.28 billion in fourth-quarter sales, growing 22% year over year to beat expectations for \$1.2 billion.

Yahoo Finance Video

Why this analyst says Boeing and GE are a buy

Kramer Capital Research CIO Hillary Cramer joins The Final Round to break down why investors should buy Boeing and GE shares when they fall.

Barrons.com

10 Companies Microsoft Could Buy to Boost Its Growing Cloud Business

It might be time for (MSFT) to go shopping. Piper Sandler analyst Brent Bracelin asserts in a research note Thursday that 2020 could be a defining year for the software giant. He argues that Microsoft (ticker: MSFT) has “a unique opportunity to further elevate its cloud leadership position through share gains and needle-moving M&A.” The company's huge run to a \$1 trillion-plus valuation has been driven by the remarkable growth in its Azure cloud business, which is smaller than (AMZN)'s (AMZN) Amazon Web Services but growing faster—and Bracelin thinks the company can press its advantage with a smart deals.

MarketWatch

Young trader’s epic Beyond Meat stock misfire: ‘Biggest mistake of my life’

For veteran Wall Street types, \$12,000 is a rounding error, but for a guy getting his feet wet in the options pits, losing that much will leave a scar. Unfortunately, that's what happened this week to an anonymous trader whom we'll call “Juice,” if the sob story he shared on Reddit is accurate. “I thought I'd give options a try because I was doing pretty well swing trading and it was probably the biggest mistake of my life,” he wrote in a post.

MarketWatch

Broadcom: Deals with Apple could be worth \$15 billion

Broadcom Inc. (avgo) disclosed Thursday afternoon new deals with Apple Inc. (aapl) worth \$15 billion, and shares moved higher in extended trading. In a filing with the Securities and Exchange Commission, the chip maker said that it had signed two multiyear statement of work agreements with the iPhone manufacturer for components that will be included in Apple products beginning this month. The two deals are in addition to an agreement to supply RF chips that Broadcom disclosed last summer.

NerdWallet

Who Should Consider a Roth Conversion Now?

The new law requires most IRAs inherited by people other than spouses to be drained within 10 years, which can lead to much higher tax bills for heirs. Spouses still have the option of treating an inherited IRA as their own and taking money out over their lifetimes. At the same time, the Secure Act delayed when required minimum distributions have to begin for most retirement account owners, increasing the age for mandatory distributions from 70 1/2 to 72.

TheStreet.com

7 Low-Risk Investments With High Returns in 2020

The classic risk-free investment is Treasury securities, but even they carry some degree of price risk from changes in interest rates, though the risk of default is slim to none. To be clear, dividend-paying stocks do carry risk as they are still subject to the same factors that impact the stock market. Investing for dividend yield is about finding those companies that pay higher dividends as a source of yield.

GE Stock Rebounds From Recent Slump As 'The Story Has Shifted'

General Electric is in a "budding turnaround" and should see minimal disruption from the Boeing 737 Max crisis, Morgan Stanley said. GE stock rallied back near a buy point, snapping a string of down days. Morgan Stanley analyst Joshua Pokrzywinski on Wednesday hiked his GE stock rating to overweight from equal weight and the price target to 14 from 11.

USA TODAY

That letter from the IRS could be a fake. Watch out for this tax scam and others in 2020

Fraudsters want your Social Security number and other key personal information in order to file fake tax returns as early as they can in the season to claim inflated tax refunds. Weed at work:New cannabis-based products cause workplace confusion Porsche's revamp : How the SUV boom changed Porsche So, the con artists will be busy long before the April 15 tax deadline. The crooks want to e-file tax returns before you do because they know that the Internal Revenue Service system will reject a tax return when the IRS has already received another return using the same Social Security number.

MarketWatch

Mortgage rates fall to the lowest level in three months — but this is a double-edged sword for home buyers

The 30-year fixed-rate mortgage averaged 3.6% during the week ending Jan. 23, down five basis points from the previous week, Freddie Mac (FMCC) reported Thursday. The 15-year fixed-rate mortgage also fell five basis points to 3.04%, according to Freddie Mac. The 5/1 adjustable-rate mortgage, meanwhile, dropped a 11 basis points to an average of 3.28%.

TipRanks

Analysts: These 3 “Strong Buy” Penny Stocks Could Gain Over 50%

Using TipRanks' Stock Screener tool, we filtered the results by current share price, analyst consensus and price target upside to track down 3 penny stocks that have amassed enough analyst support to earn a “Strong Buy” consensus rating. Adding to the good news, each pick boasts over 50% upside potential. Let's dive in.

Investopedia

Want to Retire in Five Years? What You Must Know

This is as simple as making a list of the items or experiences you expect to spend money on and determining how much they are likely to cost. One way is to use your current budget as the starting point. Then eliminate/lower the expenses that will no longer apply (such as the gasoline you use to commute to and from work) and add/increase the items that will represent new expenses during retirement (such as higher home utility bills or more leisure travel).