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Is It Time To Buy CommScope Holding Company Inc (NASDAQ:COMM) Based Off Its PE Ratio?

This analysis is intended to introduce important early concepts to people who are starting to invest and want to begin learning the link between CommScope Holding Company Inc (NASDAQ:COMM)’s fundamentals and stock market performance.

CommScope Holding Company Inc (NASDAQ:COMM) is currently trading at a trailing P/E of 29.4x, which is lower than the industry average of 31x. While COMM might seem like an attractive stock to buy, it is important to understand the assumptions behind the P/E ratio before you make any investment decisions. In this article, I will explain what the P/E ratio is as well as what you should look out for when using it. View out our latest analysis for CommScope Holding Company

Breaking down the P/E ratio

NasdaqGS:COMM PE PEG Gauge June 21st 18
NasdaqGS:COMM PE PEG Gauge June 21st 18

P/E is often used for relative valuation since earnings power is a chief 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 dollar of the company’s earnings.

P/E Calculation for COMM

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

COMM Price-Earnings Ratio = $29.76 ÷ $1.011 = 29.4x

The P/E ratio isn’t a metric you view in isolation and only becomes useful when you compare it against other similar companies. We preferably want to compare the stock’s P/E ratio to the average of companies that have similar features to COMM, such as capital structure and profitability. One way of gathering a peer group is to use firms in the same industry, which is what I’ll do. COMM’s P/E of 29.4x is lower than its industry peers (31x), which implies that each dollar of COMM’s earnings is being undervalued by investors. As such, our analysis shows that COMM represents an under-priced stock.

Assumptions to watch out for

While our conclusion might prompt you to buy COMM immediately, there are two important assumptions you should be aware of. Firstly, our peer group contains companies that are similar to COMM. If this isn’t the case, the difference in P/E could be due to other factors. For example, if you compared higher growth firms with COMM, then its P/E would naturally be lower since investors would reward its peers’ higher growth with a higher price. The second assumption that must hold true is that the stocks we are comparing COMM to are fairly valued by the market. If this is violated, COMM’s P/E may be lower than its peers as they are actually overvalued by investors.

What this means for you:

You may have already conducted fundamental analysis on the stock as a shareholder, so its current undervaluation could signal a good buying opportunity to increase your exposure to COMM. 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 COMM’s future growth? Take a look at our free research report of analyst consensus for COMM’s outlook.

  2. Past Track Record: Has COMM 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 COMM’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.

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