Investors Continue Waiting On Sidelines For Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH)

Amphastar Pharmaceuticals, Inc.'s (NASDAQ:AMPH) price-to-earnings (or "P/E") ratio of 14.1x 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 18x and even P/E's above 33x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Amphastar Pharmaceuticals has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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.

View our latest analysis for Amphastar Pharmaceuticals

Keen to find out how analysts think Amphastar Pharmaceuticals' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Amphastar Pharmaceuticals' Growth Trending?

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

Retrospectively, the last year delivered an exceptional 63% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 1,456% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 13% each year during the coming three years according to the six analysts following the company. With the market only predicted to deliver 10% each year, the company is positioned for a stronger earnings result.

With this information, we find it odd that Amphastar Pharmaceuticals 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.

What We Can Learn From Amphastar Pharmaceuticals' 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 Amphastar Pharmaceuticals currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Plus, you should also learn about this 1 warning sign we've spotted with Amphastar Pharmaceuticals.

If these risks are making you reconsider your opinion on Amphastar Pharmaceuticals, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.