Hamilton Beach Brands Holding Company (NYSE:HBB) Held Back By Insufficient Growth Even After Shares Climb 27%

Those holding Hamilton Beach Brands Holding Company (NYSE:HBB) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The annual gain comes to 100% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may still consider Hamilton Beach Brands Holding as an attractive investment with its 9.7x 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.

Hamilton Beach Brands Holding certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. 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.

View our latest analysis for Hamilton Beach Brands Holding

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hamilton Beach Brands Holding's earnings, revenue and cash flow.

How Is Hamilton Beach Brands Holding's Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Hamilton Beach Brands Holding's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 115% gain to the company's bottom line. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 1.1% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 13% shows it's an unpleasant look.

In light of this, it's understandable that Hamilton Beach Brands Holding's P/E would sit below the majority of other companies. 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 Bottom Line On Hamilton Beach Brands Holding's P/E

The latest share price surge wasn't enough to lift Hamilton Beach Brands Holding's P/E close to the market median. 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.

We've established that Hamilton Beach Brands Holding maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You always need to take note of risks, for example - Hamilton Beach Brands Holding has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on Hamilton Beach Brands Holding, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com