Stock Analysis

Investors Interested In Ollie's Bargain Outlet Holdings, Inc.'s (NASDAQ:OLLI) Earnings

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Ollie's Bargain Outlet Holdings, Inc.'s (NASDAQ:OLLI) price-to-earnings (or "P/E") ratio of 29.3x might make it look like a strong 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 9x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Ollie's Bargain Outlet Holdings certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Ollie's Bargain Outlet Holdings

NasdaqGM:OLLI Price to Earnings Ratio vs Industry December 28th 2023
Want the full picture on analyst estimates for the company? Then our free report on Ollie's Bargain Outlet Holdings will help you uncover what's on the horizon.

How Is Ollie's Bargain Outlet Holdings' Growth Trending?

In order to justify its P/E ratio, Ollie's Bargain Outlet Holdings would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 70% gain to the company's bottom line. Still, incredibly EPS has fallen 28% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 22% during the coming year according to the analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 10%, which is noticeably less attractive.

With this information, we can see why Ollie's Bargain Outlet Holdings is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Ollie's Bargain Outlet Holdings' P/E

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Ollie's Bargain Outlet Holdings' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Ollie's Bargain Outlet Holdings with six simple checks will allow you to discover any risks that could be an issue.

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 helping make it simple.

Find out whether Ollie's Bargain Outlet Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.