Profits against the share price of Impala Platinum Holdings Limited (JSE: IMP) after falling 29%
Impala Platinum Holdings Limited (JSE: IMP) Shareholders who were waiting for something to happen took a heavy blow with the share price falling 29% last month. Indeed, the recent decline has reduced its annual gain to a relatively calm level of 2.3% over the past twelve months.
Following the sharp drop in prices, given that almost half of the companies in South Africa have price-to-earnings (or “P / E”) ratios above 12x, you can consider Impala Platinum Holdings to be a very attractive investment. with its 3x P / E Ratio. Nonetheless, we would need to dig a little deeper to determine if there is a rational basis for the greatly reduced P / E.
Impala Platinum Holdings has certainly been doing a good job lately, as its profits have grown more than most other companies. One possibility is that the P / E is weak because investors think this strong earnings performance might be less impressive going forward. If not, existing shareholders have reason to be quite optimistic about the future direction of the share price.
Check out our latest review for Impala Platinum Holdings
If you’d like to see what analysts are forecasting for the future, you should check out our free report on Impala Platinum Holdings.
Is there growth for Impala Platinum Holdings?
Impala Platinum Holdings’ P / E ratio would be typical of a company that is expected to deliver very low growth or even declining profits, and most importantly, much worse performance than the market.
If we look at the last year of earnings growth, the company posted a tremendous increase of 190%. Still, PSE has barely increased from three years ago in total, which is not ideal. Thus, shareholders would probably not have been too happy with the volatility of growth rates in the medium term.
As for the outlook, next year is expected to generate 3.2% growth as estimated by the six analysts watching the company. Meanwhile, the rest of the market is expected to grow by 30%, which is definitely more attractive.
With this information we can see why Impala Platinum Holdings is trading at a lower P / E than the market. Apparently, many shareholders weren’t comfortable hanging on as the company potentially contemplates a less prosperous future.
The net result on the P / E of Impala Platinum Holdings
Shares of Impala Platinum Holdings have fallen and its P / E is now low enough to hit the ground. We would say that the power of the price / earnings ratio is not primarily as a valuation instrument, but rather to gauge current investor sentiment and future expectations.
We have determined that Impala Platinum Holdings maintains its low P / E due to its weak growth forecast below that of the broader market, as expected. Right now, shareholders are accepting the low P / E as they admit that future earnings are unlikely to provide any good surprises. Unless these conditions improve, they will continue to act as a barrier to the share price around these levels.
We don’t want to rain too much on the parade, but we also found 4 warning signs for Impala Platinum Holdings (1 is significant!) That you should be aware of.
You may be able to find a better investment than Impala Platinum Holdings. If you want a selection of possible candidates, check out this free List of interesting companies that are trading at a P / E of less than 20x (but have proven that they can increase their profits).
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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