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Highlights
- P/E ratio is a stock analysis tool that implies the ratio of a company’s share price to its earnings per share (EPS)
- For the last ten years, Domino’s Pizza has demonstrated a steady upward trend in EBIT growth.
- The P/E ratio is useful in determining whether a stock is overvalued or undervalued.
Consumer stocks belong to the category of stocks that produce consumer-oriented products. It is broadly classified into two groups:
Consumer non-discretionary – Also known as consumer cyclicals, these stocks generally include companies providing non-essential goods and services. These can range from luxury apparel, entertainment, automobiles, etc.
Consumer staples – These are also known as consumer non-cyclicals and include essential products such as food and beverages, personal care products, household products, etc.
In this article, we will discuss four stocks from the consumer space with a higher price-to-earnings (P/E ratio).
P/E ratio implies a company’s share price ratio to its earnings per share (EPS). It is a widely used stock analysis tool by investors to determine a stock’s relative valuation.
The P/E ratio is useful in determining whether a stock is overvalued or undervalued.
A company is generally thought to be overvalued if it has a higher P/E ratio. It implies that the stock is expected to grow higher in the future.
Companies with no earnings or in a loss phase have no P/E ratio because there is nothing in the denominator.
Domino's Pizza Enterprises Ltd (ASX:DMP)
Domino's Pizza is Australia's largest pizza chain. It is also the largest franchisee for the Domino's Pizza brand in the world. Since 2013, the company's growth in EBIT has shown a steady upward trend starting from about AU$50M to more than AU$300M.
Reece Ltd (ASX:REH)
Reece is one of Australia's largest plumbing and bathroom supplies businesses operating across Australia and New Zealand. Following are the financial highlights of the company from the first half of FY22
- Sales revenue – up by 17%
- Normalised Earnings Before Interest, Taxes, Depreciation & Amortisation (EBITDA) – up by 14%
- Net Profit after Tax (NPAT) – up by 28%
Jumbo Interactive Ltd (ASX:JIN)
Jumbo Interactive is one of the top digital lottery companies in Australia. As per the company's update on its preliminary results of FY22, Jumbo Interactive's revenue, underlying EBITDA, and underlying NPAT surged by 27%, 14%, and 16%, respectively.
Wesfarmers Ltd (ASX:WES)
Wesfarmers has a diverse range of businesses, from home improvement and apparel to energy, fertilisers, and industrial and safety products. Wesfarmers' retail divisions are well positioned to manage inflationary pressures, and the company's portfolio has continued to evolve with the development of new growth platforms.
