Not Many Are Piling Into J.Jill, Inc. (NYSE:JILL) Stock Yet As It Plummets 28%

J.Jill, Inc. (NYSE:JILL) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The recent drop has obliterated the annual return, with the share price now down 4.0% over that longer period.

Even after such a large drop in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may still consider J.Jill as an attractive investment with its 9.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times have been pleasing for J.Jill 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.

View our latest analysis for J.Jill

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

How Is J.Jill's Growth Trending?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 35% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 18% during the coming year according to the six analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 15%, which is noticeably less attractive.

With this information, we find it odd that J.Jill 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.

The Key Takeaway

J.Jill's recently weak share price has pulled its P/E below most other companies. 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.

We've established that J.Jill 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.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for J.Jill that you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.