Meridian Bioscience, Inc. (NASDAQ:VIVO) may be sending bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 19x and even P/E’s higher than 38x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it’s justified.” data-reactid=”28″ type=”text”>With a price-to-earnings (or “P/E”) ratio of 15.5x Meridian Bioscience, Inc. (NASDAQ:VIVO) may be sending bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 19x and even P/E’s higher than 38x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it’s justified.
Recent times have been pleasing for Meridian Bioscience as its earnings have risen in spite of the market’s earnings going into reverse. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. 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 out of favour.
free report on Meridian Bioscience.” data-reactid=”47″ type=”text”>If you’d like to see what analysts are forecasting going forward, you should check out our free report on Meridian Bioscience.
What Are Growth Metrics Telling Us About The Low P/E?
In order to justify its P/E ratio, Meridian Bioscience would need to produce sluggish growth that’s trailing the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 69% last year. The latest three year period has also seen an excellent 102% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.
Looking ahead now, EPS is anticipated to slump, contracting by 0.8% during the coming year according to the three analysts following the company. With the market predicted to deliver 4.4% growth , that’s a disappointing outcome.
With this information, we are not surprised that Meridian Bioscience is trading at a P/E lower than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
What We Can Learn From Meridian Bioscience’s P/E?
Using the price-to-earnings ratio alone to determine if you should sell your stock isn’t sensible, however it can be a practical guide to the company’s future prospects.
We’ve established that Meridian Bioscience maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won’t provide any pleasant surprises. It’s hard to see the share price rising strongly in the near future under these circumstances.
3 warning signs for Meridian Bioscience (1 makes us a bit uncomfortable!) that we have uncovered.” data-reactid=”56″ type=”text”>Before you take the next step, you should know about the 3 warning signs for Meridian Bioscience (1 makes us a bit uncomfortable!) that we have uncovered.
list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).” data-reactid=”57″ type=”text”>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 P/E ratio below 20x).
This article by Simply Wall St is general in nature. 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.