Hibbett, Inc.'s (NASDAQ:HIBB) Shares Bounce 29% But Its Business Still Trails The Market

Hibbett, Inc. (NASDAQ:HIBB) shares have continued their recent momentum with a 29% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 12% is also fairly reasonable.

Even after such a large jump in price, Hibbett's price-to-earnings (or "P/E") ratio of 7.4x might still make it look like a strong buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 17x and even P/E's above 33x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Recent times have been pleasing for Hibbett as its earnings have risen in spite of the market's earnings going into reverse. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. 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.

Check out our latest analysis for Hibbett

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

Is There Any Growth For Hibbett?

In order to justify its P/E ratio, Hibbett would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered a decent 7.6% gain to the company's bottom line. This was backed up an excellent period prior to see EPS up by 179% 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 slump, contracting by 0.9% during the coming year according to the seven analysts following the company. Meanwhile, the broader market is forecast to expand by 10%, which paints a poor picture.

With this information, we are not surprised that Hibbett is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On Hibbett's P/E

Even after such a strong price move, Hibbett's P/E still trails the rest of the market significantly. 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.

We've established that Hibbett 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 2 warning signs for Hibbett you should be aware of, and 1 of them shouldn't be ignored.

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

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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.