Nature's Sunshine Products, Inc.'s (NASDAQ:NATR) Share Price Matching Investor Opinion

Nature's Sunshine Products, Inc.'s (NASDAQ:NATR) price-to-earnings (or "P/E") ratio of 25x might make it look like a sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 17x and even P/E's below 10x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

Our free stock report includes 1 warning sign investors should be aware of before investing in Nature's Sunshine Products. Read for free now.

Nature's Sunshine Products hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Nature's Sunshine Products

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nature's Sunshine Products.

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as high as Nature's Sunshine Products' is when the company's growth is on track to outshine the market.

Retrospectively, the last year delivered a frustrating 37% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 50% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 46% during the coming year according to the two analysts following the company. That's shaping up to be materially higher than the 14% growth forecast for the broader market.

With this information, we can see why Nature's Sunshine Products is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Nature's Sunshine Products' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Nature's Sunshine Products that 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.