Despite an already strong run, Navios Maritime Containers L.P. (NASDAQ:NMCI) shares have been powering on, with a gain of 69% in the last thirty days. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.1% in the last twelve months.
Although its price has surged higher, Navios Maritime Containers may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 13.3x, since almost half of all companies in the United States have P/E ratios greater than 19x and even P/E's higher than 38x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.
The earnings growth achieved at Navios Maritime Containers over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.
See our latest analysis for Navios Maritime Containers
Although there are no analyst estimates available for Navios Maritime Containers, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Is There Any Growth For Navios Maritime Containers?
In order to justify its P/E ratio, Navios Maritime Containers would need to produce sluggish growth that's trailing the market.
Retrospectively, the last year delivered a decent 9.0% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen an unpleasant 36% overall drop in EPS. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 11% shows it's an unpleasant look.
In light of this, it's understandable that Navios Maritime Containers' P/E would sit below the majority of other companies. However, we think shrinking earnings are unlikely to lead to a stable P/E over the longer term, which could set up shareholders for future disappointment. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.
The Key Takeaway
The latest share price surge wasn't enough to lift Navios Maritime Containers' P/E close to the market median. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
We've established that Navios Maritime Containers maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Navios Maritime Containers (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
If these risks are making you reconsider your opinion on Navios Maritime Containers, explore our interactive list of high quality stocks to get an idea of what else is out there.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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