United States Lime & Minerals, Inc. (NASDAQ:USLM) Not Lagging Market On Growth Or Pricing
United States Lime & Minerals, Inc. (NASDAQ:USLM) has a high P/E ratio of 30.9x, indicating strong growth expectations despite market averages being lower. The company has seen impressive earnings growth, with a 45% increase last year and a 228% rise over three years. Investors are optimistic about continued growth, justifying the elevated P/E. However, potential risks exist, and shareholders remain confident unless market conditions change. A warning sign has been identified for the company, suggesting caution for investors.
United States Lime & Minerals, Inc.'s (NASDAQ:USLM) price-to-earnings (or "P/E") ratio of 30.9x might make it look like a strong sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 18x and even P/E's below 11x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.
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Recent times have been quite advantageous for United States Lime & Minerals as its earnings have been rising very briskly. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.
See our latest analysis for United States Lime & Minerals
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on United States Lime & Minerals will help you shine a light on its historical performance.
Is There Enough Growth For United States Lime & Minerals?
United States Lime & Minerals' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 45% last year. Pleasingly, EPS has also lifted 228% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.
Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 15% shows it's noticeably more attractive on an annualised basis.
In light of this, it's understandable that United States Lime & Minerals' P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.
The Final Word
It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
We've established that United States Lime & Minerals maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.
You should always think about risks. Case in point, we've spotted 1 warning sign for United States Lime & Minerals you should be aware of.
Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.
