Kohl's Corporation (NYSE:KSS) Stock Rockets 74% But Many Are Still Ignoring The Company

Despite an already strong run, Kohl's Corporation (NYSE:KSS) shares have been powering on, with a gain of 74% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

In spite of the firm bounce in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 19x, you may still consider Kohl's as an attractive investment with its 13.3x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Kohl's could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Kohl's

Want the full picture on analyst estimates for the company? Then our free report on Kohl's will help you uncover what's on the horizon.

What Are Growth Metrics Telling Us About The Low P/E?

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

Retrospectively, the last year delivered a frustrating 57% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 84% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the ten analysts covering the company suggest earnings should grow by 28% per annum over the next three years. With the market only predicted to deliver 11% per year, the company is positioned for a stronger earnings result.

With this information, we find it odd that Kohl's 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 Final Word

The latest share price surge wasn't enough to lift Kohl's' P/E close to the market median. 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.

Our examination of Kohl's' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. 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 these 5 warning signs we've spotted with Kohl's (including 1 which is potentially serious).

You might be able to find a better investment than Kohl's. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.