Investors Continue Waiting On Sidelines For Old Dominion Freight Line, Inc. (NASDAQ:ODFL)

It's not a stretch to say that Old Dominion Freight Line, Inc.'s (NASDAQ:ODFL) price-to-earnings (or "P/E") ratio of 18.8x right now seems quite "middle-of-the-road" compared to the market in the United States, where the median P/E ratio is around 17x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times haven't been advantageous for Old Dominion Freight Line as its earnings have been falling quicker than most other companies. One possibility is that the P/E is moderate because investors think the company's earnings trend will eventually fall in line with most others in the market. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

See our latest analysis for Old Dominion Freight Line

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

Is There Some Growth For Old Dominion Freight Line?

There's an inherent assumption that a company should be matching the market for P/E ratios like Old Dominion Freight Line's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 7.6% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 299% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 43% each year during the coming three years according to the analysts following the company. With the market only predicted to deliver 10% each year, the company is positioned for a stronger earnings result.

With this information, we find it interesting that Old Dominion Freight Line is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Old Dominion Freight Line's 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.

Our examination of Old Dominion Freight Line's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Old Dominion Freight Line that you need to be mindful of.

If these risks are making you reconsider your opinion on Old Dominion Freight Line, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.