Stock Analysis

The Market Doesn't Like What It Sees From Apogee Enterprises, Inc.'s (NASDAQ:APOG) Earnings Yet

NasdaqGS:APOG
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Apogee Enterprises, Inc.'s (NASDAQ:APOG) price-to-earnings (or "P/E") ratio of 11.9x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 17x and even P/E's above 32x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Apogee Enterprises has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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.

See our latest analysis for Apogee Enterprises

pe-multiple-vs-industry
NasdaqGS:APOG Price to Earnings Ratio vs Industry February 13th 2024
Keen to find out how analysts think Apogee Enterprises' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Apogee Enterprises' Growth Trending?

In order to justify its P/E ratio, Apogee Enterprises would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 59% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 77% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next year should bring diminished returns, with earnings decreasing 7.8% as estimated by the three analysts watching the company. With the market predicted to deliver 13% growth , that's a disappointing outcome.

With this information, we are not surprised that Apogee Enterprises is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Final Word

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Apogee Enterprises maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. 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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Apogee Enterprises you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Valuation is complex, but we're helping make it simple.

Find out whether Apogee Enterprises is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.