When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may consider DHT Holdings, Inc. (NYSE:DHT) as an attractive investment with its 12.1x 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.
DHT Holdings certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, 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.
Check out our latest analysis for DHT Holdings
Is There Any Growth For DHT Holdings?
The only time you'd be truly comfortable seeing a P/E as low as DHT Holdings' is when the company's growth is on track to lag the market.
Retrospectively, the last year delivered an exceptional 166% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 42% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
Looking ahead now, EPS is anticipated to climb by 16% each year during the coming three years according to the six analysts following the company. With the market only predicted to deliver 9.8% each year, the company is positioned for a stronger earnings result.
In light of this, it's peculiar that DHT Holdings' P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Bottom Line On DHT Holdings' 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.
We've established that DHT Holdings currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.
You should always think about risks. Case in point, we've spotted 1 warning sign for DHT Holdings you should be aware of.
Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.
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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.
About NYSE:DHT
DHT Holdings
Through its subsidiaries, owns and operates crude oil tankers primarily in Monaco, Singapore, and Norway.
Excellent balance sheet with reasonable growth potential and pays a dividend.
