It’s no exaggeration to say that Airline Services Group, Inc. (NASDAQ: ATSG) The price / earnings (or “P / E”) ratio of 16.2x currently looks quite “average” compared to the US market, where the median P / E ratio is around 18x . While it doesn’t raise eyebrows, if the P / E ratio isn’t warranted, investors could miss out on a potential opportunity or ignore the looming disappointment.
With earnings growth slower than most other companies lately, Air Transport Services Group has been relatively slow. Many may expect the performance of interest-free earnings to strengthen positively, which has kept the P / E from falling. You really hope so, otherwise you are paying a relatively high price for a business with this type of growth profile.
NasdaqGS: ATSG Price Based on Past Revenue September 17, 2021
free report is a great place to start
How is the growth of the Air Transport Services group evolving?
The only time you would be comfortable seeing a P / E like that of Air Transport Services Group is when the growth of the company closely follows the market.
If we look at the last year of earnings growth, the company posted a tremendous 23% increase. EPS was also up 6.9% overall from three years ago, mainly thanks to the last 12 months of growth. So shareholders would probably have been happy with the earnings growth rates over the medium term.
Looking ahead, EPS is expected to grow 0.9% each year for the next three years, according to four analysts who follow the company. With the market predicted to grow 12% each year, the company is positioned for a lower earnings result.
In light of this, it is curious that the P / E of Air Transport Services Group is in line with the majority of other companies. Apparently, many investors in the company are less bearish than analysts indicate and are not willing to give up their shares just yet. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh on equities futures.
The last word
Using only the price-to-earnings ratio to determine if you should sell your stock isn’t good idea, but it can be a handy guide to the company’s future prospects.
Our review of analyst forecasts for Air Transport Services Group revealed that its lower earnings outlook is not affecting its P / E as much as we would have expected. Right now we are uncomfortable with the P / E as expected future earnings are unlikely to support more positive sentiment for long. This puts shareholders’ investments at risk and potential investors risk paying an unnecessary premium.
Before proceeding to the next step, you should know the 4 warning signs for Air Transport Services Group (1 is a bit rude!) That we discovered.
Sure, you might find a fantastic investment by looking at a few good candidates. So take a look at this free list of companies with a solid growth history, trading at a P / E below 20x.
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