There's No Escaping Moog Inc.'s (NYSE:MOG.A) Muted Earnings
With a price-to-earnings (or "P/E") ratio of 15.5x Moog Inc. (NYSE:MOG.A) may be sending bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 20x and even P/E's higher than 38x 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 limited.
Recent times haven't been advantageous for Moog as its earnings have been falling quicker than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.
See our latest analysis for Moog
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Moog.
Is There Any Growth For Moog?
Moog'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.
Retrospectively, the last year delivered a frustrating 17% decrease to the company's bottom line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 6.9% overall rise in EPS. So we can start by confirming that the company has generally done a good job of growing earnings over that time, even though it had some hiccups along the way.
Looking ahead now, EPS is anticipated to slump, contracting by 13% during the coming year according to the four analysts following the company. Meanwhile, the broader market is forecast to expand by 3.7%, which paints a poor picture.
With this information, we are not surprised that Moog is trading at a P/E lower than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
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.
As we suspected, our examination of Moog's analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
It is also worth noting that we have found 3 warning signs for Moog 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.
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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