Oceania Healthcare Limited (NZSE:OCA) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. But the gains over the last month weren’t enough to make shareholders whole, as the share price is still down 5.3% in the last twelve months.
Although its price has surged higher, there still wouldn’t be many who think Oceania Healthcare’s price-to-earnings (or “P/E”) ratio of 16.3x is worth a mention when the median P/E in New Zealand is similar at about 17x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
Recent times have been pleasing for Oceania Healthcare as its earnings have risen in spite of the market’s earnings going into reverse. One possibility is that the P/E is moderate because investors think the company’s earnings will be less resilient moving forward. 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 Oceania Healthcare
NZSE:OCA Price to Earnings Ratio vs Industry July 22nd 2024 Keen to find out how analysts think Oceania Healthcare’s future stacks up against the industry? In that case, our free report is a great place to start. Is There Some Growth For Oceania Healthcare?
NZSE:OCA Price to Earnings Ratio vs Industry July 22nd 2024 Keen to find out how analysts think Oceania Healthcare’s future stacks up against the industry? In that case, our free report is a great place to start. Is There Some Growth For Oceania Healthcare? In order to justify its P/E ratio, Oceania Healthcare would need to produce growth that’s similar to the market.
Retrospectively, the last year delivered an exceptional 101% gain to the company’s bottom line. Still, incredibly EPS has fallen 74% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
Turning to the outlook, the next three years should generate growth of 46% each year as estimated by the four analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 19% per annum, which is noticeably less attractive.
In light of this, it’s curious that Oceania Healthcare’s P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Bottom Line On Oceania Healthcare’s P/E
Oceania Healthcare appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. Typically, we’d caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
Our examination of Oceania Healthcare’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. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.
Don’t forget that there may be other risks. For instance, we’ve identified 3 warning signs for Oceania Healthcare (1 shouldn’t be ignored) you should be aware of.
If these risks are making you reconsider your opinion on Oceania Healthcare, explore our interactive list of high quality stocks to get an idea of what else is out there.
Valuation is complex, but we’re helping make it simple.
Find out whether Oceania Healthcare 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.
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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.
Valuation is complex, but we’re helping make it simple.
Find out whether Oceania Healthcare 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
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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Publish date : 2024-07-22 14:28:49
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