Earnings Working Against Moderna, Inc.'s (NASDAQ:MRNA) Share Price Following 28% Dive

Moderna, Inc. (NASDAQ:MRNA) shares have had a horrible month, losing 28% after a relatively good period beforehand. Longer-term shareholders would now have taken a real hit with the stock declining 8.0% in the last year.

Following the heavy fall in price, Moderna may be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 6.4x, since almost half of all companies in the United States have P/E ratios greater than 16x and even P/E's higher than 30x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

While the market has experienced earnings growth lately, Moderna's earnings have gone into reverse gear, which is not great. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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.

See our latest analysis for Moderna

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

Is There Any Growth For Moderna?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Moderna's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 30%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to slump, contracting by 57% each year during the coming three years according to the analysts following the company. Meanwhile, the broader market is forecast to expand by 9.8% per annum, which paints a poor picture.

In light of this, it's understandable that Moderna's P/E would sit below the majority of other companies. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Final Word

Moderna's P/E looks about as weak as its stock price lately. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Moderna maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 3 warning signs for Moderna you should be aware of, and 2 of them make us uncomfortable.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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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.