Positive Sentiment Still Eludes Hudson Technologies, Inc. (NASDAQ:HDSN) Following 26% Share Price Slump

The Hudson Technologies, Inc. (NASDAQ:HDSN) share price has fared very poorly over the last month, falling by a substantial 26%. Longer-term, the stock has been solid despite a difficult 30 days, gaining 14% in the last year.

In spite of the heavy fall in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 19x, you may still consider Hudson Technologies as an attractive investment with its 13x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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Hudson Technologies hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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Does Growth Match The Low P/E?

Hudson Technologies' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a frustrating 24% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 78% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 15% as estimated by the four analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 16%, which is not materially different.

In light of this, it's peculiar that Hudson Technologies' P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

Hudson Technologies' P/E has taken a tumble along with its share price. 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 Hudson Technologies' analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Hudson Technologies with six simple checks will allow you to discover any risks that could be an issue.

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

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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.