Nasdaq
華爾街日報What LaserBond Limited's (ASX:LBL) 26% Share Price Gain Is Not Telling You
LaserBond Limited (ASX:LBL) shareholders have had their patience rewarded with a 26% share price jump in the last month. Looking further back, the 15% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about LaserBond's P/E ratio of 19.3x, since the median price-to-earnings (or "P/E") ratio in Australia is also close to 21x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
The recent earnings growth at LaserBond would have to be considered satisfactory if not spectacular. One possibility is that the P/E is moderate because investors think this good earnings growth might only be parallel to the broader market in the near future. 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 not quite in favour.
Check out our latest analysis for LaserBond
Is There Some Growth For LaserBond?
The only time you'd be comfortable seeing a P/E like LaserBond's is when the company's growth is tracking the market closely.
Retrospectively, the last year delivered a decent 5.7% gain to the company's bottom line. Still, lamentably EPS has fallen 1.9% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
In contrast to the company, the rest of the market is expected to grow by 23% over the next year, which really puts the company's recent medium-term earnings decline into perspective.
In light of this, it's somewhat alarming that LaserBond's P/E sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.
The Key Takeaway
LaserBond appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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 LaserBond currently trades on a higher than expected P/E since its recent earnings have been in decline over the medium-term. Right now we are uncomfortable with the P/E as this earnings performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.
There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for LaserBond that you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.