It would probably trade on a higher P/E ratio if it had a lot of cash, but I doubt it is having a big impact. Circa Enterprises’s Balance SheetĬirca Enterprises’s net debt is 7.3% of its market cap. Such spending might be good or bad, overall, but the key point here is that you need to look at debt to understand the P/E ratio in context. In theory, a company can lower its future P/E ratio by using cash or debt to invest in growth. That means it doesn’t take debt or cash into account. It’s important to note that the P/E ratio considers the market capitalization, not the enterprise value. The image below shows that Circa Enterprises has a lower P/E than the average (15.9) P/E for companies in the electrical industry.ĭon’t Forget: The P/E Does Not Account For Debt or Bank Deposits The P/E ratio indicates whether the market has higher or lower expectations of a company. How Does Circa Enterprises’s P/E Ratio Compare To Its Peers? Unfortunately, earnings per share are down 1.8% a year, over 5 years. With that performance, I would expect it to have an above average P/E ratio. And its annual EPS growth rate over 3 years is 20%. Notably, Circa Enterprises grew EPS by a whopping 104% in the last year. A lower P/E should indicate the stock is cheap relative to others - and that may attract buyers. That means even if the current P/E is high, it will reduce over time if the share price stays flat. That’s because companies that grow earnings per share quickly will rapidly increase the ‘E’ in the equation. How Growth Rates Impact P/E RatiosĮarnings growth rates have a big influence on P/E ratios. That is not a good or a bad thing per se, but a high P/E does imply buyers are optimistic about the future. P/E of 8.22 = CA$1.2 ÷ CA$0.15 (Based on the year to September 2018.) Is A High Price-to-Earnings Ratio Good?Ī higher P/E ratio means that buyers have to pay a higher price for each CA$1 the company has earned over the last year. Price to Earnings Ratio = Price per Share ÷ Earnings per Share (EPS) In other words, at today’s prices, investors are paying CA$8.22 for every CA$1 in prior year profit.Ĭheck out our latest analysis for Circa Enterprises How Do You Calculate A P/E Ratio? Circa Enterprises has a price to earnings ratio of 8.22, based on the last twelve months. To keep it practical, we’ll show how Circa Enterprises Inc.’s ( CVE:CTO) P/E ratio could help you assess the value on offer. This article is written for those who want to get better at using price to earnings ratios (P/E ratios). Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!
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