Tigers Realm Coal Limited's (ASX:TIG) Low P/E No Reason For Excitement
Tigers Realm Coal Limited's (ASX:TIG) price-to-earnings (or "P/E") ratio of 3.2x might make it look like a strong buy right now compared to the market in Australia, where around half of the companies have P/E ratios above 16x and even P/E's above 33x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.
With earnings growth that's exceedingly strong of late, Tigers Realm Coal has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 Tigers Realm Coal
Although there are no analyst estimates available for Tigers Realm Coal, 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 Tigers Realm Coal?
The only time you'd be truly comfortable seeing a P/E as depressed as Tigers Realm Coal's is when the company's growth is on track to lag the market decidedly.
Taking a look back first, we see that the company grew earnings per share by an impressive 38% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.
This is in contrast to the rest of the market, which is expected to grow by 18% over the next year, materially higher than the company's recent medium-term annualised growth rates.
With this information, we can see why Tigers Realm Coal is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.
The Bottom Line On Tigers Realm Coal's P/E
Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
We've established that Tigers Realm Coal maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Tigers Realm Coal (1 shouldn't be ignored!) that you need to be mindful of.
Of course, you might also be able to find a better stock than Tigers Realm Coal. So you may wish to see this free collection of other companies that sit on P/E's below 20x 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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