NWPX Infrastructure, Inc. (NASDAQ:NWPX) Shares Fly 25% But Investors Aren't Buying For Growth

NWPX Infrastructure, Inc. (NASDAQ:NWPX) shares have continued their recent momentum with a 25% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 18% is also fairly reasonable.

In spite of the firm bounce in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 20x, you may still consider NWPX Infrastructure as an attractive investment with its 15.3x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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With earnings growth that's superior to most other companies of late, NWPX Infrastructure has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 NWPX Infrastructure

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

How Is NWPX Infrastructure's Growth Trending?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 34% last year. Pleasingly, EPS has also lifted 67% 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 bring diminished returns, with earnings decreasing 2.6% per year as estimated by the three analysts watching the company. With the market predicted to deliver 11% growth per annum, that's a disappointing outcome.

With this information, we are not surprised that NWPX Infrastructure 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.

What We Can Learn From NWPX Infrastructure's P/E?

The latest share price surge wasn't enough to lift NWPX Infrastructure's P/E close to the market median. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that NWPX Infrastructure maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for NWPX Infrastructure with six simple checks on some of these key factors.

Of course, you might also be able to find a better stock than NWPX Infrastructure. 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.