Unpleasant Surprises Could Be In Store For ZipRecruiter, Inc.'s (NYSE:ZIP) Shares
ZipRecruiter, Inc.'s (NYSE:ZIP) price-to-earnings (or "P/E") ratio of 22.8x 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. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.
ZipRecruiter has been struggling lately as its earnings have declined faster than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. If not, then existing shareholders may be very nervous about the viability of the share price.
View our latest analysis for ZipRecruiter
Does Growth Match The High P/E?
In order to justify its P/E ratio, ZipRecruiter would need to produce impressive growth in excess of the market.
Retrospectively, the last year delivered a frustrating 28% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 64% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
The Bottom Line On ZipRecruiter's P/E
We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
And what about other risks? Every company has them, and we've spotted 2 warning signs for ZipRecruiter you should know about.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
Valuation is complex, but we're here to simplify it.
Discover if ZipRecruiter might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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About NYSE:ZIP
ZipRecruiter
Operates a marketplace that connects job seekers and employers in the United States and internationally.
Mediocre balance sheet and slightly overvalued.