Malibu Boats, Inc. (NASDAQ:MBUU) Screens Well But There Might Be A Catch

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 17x, you may consider Malibu Boats, Inc. (NASDAQ:MBUU) as an attractive investment with its 12x 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.

Recent times haven't been advantageous for Malibu Boats as its earnings have been falling quicker than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

Check out our latest analysis for Malibu Boats

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

Is There Any Growth For Malibu Boats?

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

Retrospectively, the last year delivered a frustrating 45% decrease to the company's bottom line. Even so, admirably EPS has lifted 36% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 19% each year during the coming three years according to the eight analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 12% each year, which is noticeably less attractive.

With this information, we find it odd that Malibu Boats is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Malibu Boats' P/E

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Malibu Boats' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Before you take the next step, you should know about the 3 warning signs for Malibu Boats that we have uncovered.

If you're unsure about the strength of Malibu Boats' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.