Edgewell Personal Care Company (NYSE:EPC) Not Lagging Market On Growth Or Pricing

By
Simply Wall St
Published
August 24, 2021
NYSE:EPC
Source: Shutterstock

With a price-to-earnings (or "P/E") ratio of 25x Edgewell Personal Care Company (NYSE:EPC) may be sending bearish signals at the moment, given that almost half of all companies in the United States have P/E ratios under 17x and even P/E's lower than 10x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's inferior to most other companies of late, Edgewell Personal Care has been relatively sluggish. One possibility is that the P/E is high because investors think this lacklustre earnings performance will improve markedly. If not, then existing shareholders may be very nervous about the viability of the share price.

View our latest analysis for Edgewell Personal Care

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NYSE:EPC Price Based on Past Earnings August 25th 2021
Keen to find out how analysts think Edgewell Personal Care's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Edgewell Personal Care's Growth Trending?

Edgewell Personal Care's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 7.3% last year. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 63% during the coming year according to the eight analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 12%, which is noticeably less attractive.

In light of this, it's understandable that Edgewell Personal Care's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

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.

As we suspected, our examination of Edgewell Personal Care's 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. Unless these conditions change, they will continue to provide strong support to the share price.

You always need to take note of risks, for example - Edgewell Personal Care has 3 warning signs we think you should be aware of.

If you're unsure about the strength of Edgewell Personal Care's 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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