Many Still Looking Away From Graphic Packaging Holding Company (NYSE:GPK)

Graphic Packaging Holding Company's (NYSE:GPK) price-to-earnings (or "P/E") ratio of 12.7x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 19x and even P/E's above 34x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Graphic Packaging Holding could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Graphic Packaging Holding

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Graphic Packaging Holding.

How Is Graphic Packaging Holding's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Graphic Packaging Holding's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a frustrating 24% decrease to the company's bottom line. Even so, admirably EPS has lifted 95% 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.

Shifting to the future, estimates from the twelve analysts covering the company suggest earnings should grow by 14% per year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 11% per year, which is noticeably less attractive.

With this information, we find it odd that Graphic Packaging Holding is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Graphic Packaging Holding's P/E

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 Graphic Packaging Holding 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.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Graphic Packaging Holding (1 is significant!) that you should be aware of before investing here.

Of course, you might also be able to find a better stock than Graphic Packaging Holding. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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

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.