XPEL, Inc. (NASDAQ:XPEL) Doing What It Can To Lift Shares

There wouldn't be many who think XPEL, Inc.'s (NASDAQ:XPEL) price-to-earnings (or "P/E") ratio of 19.1x is worth a mention when the median P/E in the United States is similar at about 18x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

XPEL hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for XPEL

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

How Is XPEL's Growth Trending?

The only time you'd be comfortable seeing a P/E like XPEL's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered a frustrating 1.4% decrease to the company's bottom line. Still, the latest three year period has seen an excellent 45% overall rise in EPS, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 16% per year over the next three years. That's shaping up to be materially higher than the 11% per year growth forecast for the broader market.

With this information, we find it interesting that XPEL is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

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 XPEL's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for XPEL you should be aware of.

If these risks are making you reconsider your opinion on XPEL, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.