Subdued Growth No Barrier To Uniphar plc (ISE:UPR) With Shares Advancing 26%

The Uniphar plc (ISE:UPR) share price has done very well over the last month, posting an excellent gain of 26%. Taking a wider view, although not as strong as the last month, the full year gain of 23% is also fairly reasonable.

Even after such a large jump in price, there still wouldn't be many who think Uniphar's price-to-earnings (or "P/E") ratio of 12.8x is worth a mention when the median P/E in Ireland is similar at about 11x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

We check all companies for important risks. See what we found for Uniphar in our free report.

Recent times have been advantageous for Uniphar as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

See our latest analysis for Uniphar

Keen to find out how analysts think Uniphar's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Growth Metrics Telling Us About The P/E?

In order to justify its P/E ratio, Uniphar would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 43%. Pleasingly, EPS has also lifted 39% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 2.4% per year as estimated by the eight analysts watching the company. That's shaping up to be materially lower than the 9.4% per year growth forecast for the broader market.

In light of this, it's curious that Uniphar's P/E sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

The Final Word

Uniphar appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

Our examination of Uniphar's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Uniphar with six simple checks on some of these key factors.

Of course, you might also be able to find a better stock than Uniphar. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.