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Highlights
- Significant decline in Johns Lyng Group (JLG) stock over the past year
- Current P/E ratio aligns with market average
- Analysts forecast moderate earning growth
Shareholders of Johns Lyng Group Limited (ASX:JLG) have faced challenging times with the company’s shares falling a notable 26% last month. This decline is part of a more extended downturn, recording a 66% decrease in share price over the past year. This extensive decline might have left some investors concerned about the company's overall performance.
Despite the drop in price, Johns Lyng Group's current price-to-earnings (P/E) ratio stands at 15x, which is not significantly off from the median P/E ratio in Australia, at approximately 17x. This might suggest market sentiment expects future performance to align with broader market trends.
Recent performances illustrate that Johns Lyng Group has experienced a drop in earnings, unlike its counterparts, which have generally seen average growth. However, some investors might view this as a temporary phase, anticipating a turnaround in earnings performance in the near future.
Over the past three years, the company managed to grow its earnings per share by an impressive 51%, despite the ups and downs observed. Looking ahead, analyst estimates indicate a potential earnings growth estimate of 17% per annum over the next three years, which is slightly above the market average forecast of 15% per annum.
This outlook brings Johns Lyng Group's P/E ratio in line with many other companies, suggesting that most investors expect average future growth. Hence, they are willing to attribute a moderate price estimate to the stock.
Concluding Thoughts
In the wake of Johns Lyng Group's share price drop, its P/E ratio remains anchored to the median market figure. While the P/E ratio should not be the sole criterion for evaluating a stock, it provides insights into earnings expectations. Currently, investors anticipate a steady performance from the company without significant swings in earnings that would justify substantial shifts in the P/E ratio.
It is essential to stay informed of any potential risks. Notably, Johns Lyng Group has a couple of warning signs to be aware of, and this should be taken into consideration when evaluating the company. Exploring alternative stocks with favorable P/E ratios and robust earnings growth might be worthwhile.
