Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) share price still meets investor opinion despite falling 32%


Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) Shareholders who were waiting for something to happen took a heavy hit with the share price falling 32% last month. Instead of being rewarded, shareholders who have already owned in the past twelve months are now sitting on a 38% drop in the share price.

Although its price has dropped significantly, there still wouldn’t be many people who think Ollie’s Bargain Outlet Holdings’ price-to-earnings (or “P / E”) ratio of 18.3x is worth checking out. mentioned when the median P / E in the United States is similar to around 17x. 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.

Ollie’s Bargain Outlet Holdings could do better as its earnings have fallen in recent times as most other companies have recorded positive earnings growth. One possibility is that the P / E is moderate because investors believe this poor earnings performance will reverse. Otherwise, existing shareholders might be a little worried about the sustainability of the share price.

NasdaqGM Price: OLLI based on historical earnings as of December 4, 2021
free Ollie’s Bargain Outlet Holdings report

Does growth match P / E?

There is an inherent assumption that a business should match the market for P / E ratios like Ollie’s Bargain Outlet Holdings to be considered reasonable.

In retrospect, last year saw a frustrating 23% drop in the company’s bottom line. Regardless, EPS managed to grow 9.5% overall from three years ago, thanks to the previous period of growth. So we can start by confirming that the company has been generally successful in increasing its profits during this time frame, although it has had a few hiccups along the way.

Looking ahead, EPS is expected to rise 10% in the coming year according to analysts who follow the company. With a market expected to grow by 11%, the company is positioned for comparable earnings.

With this information, we can see why Ollie’s Bargain Outlet Holdings is trading at a P / E quite similar to the market. It appears that most investors expect average future growth and are only prepared to pay a moderate amount for the stock.

The key to take away

With its share price falling into a hole, the P / E of Ollie’s Bargain Outlet Holdings now looks fairly average. As a general rule, we do not recommend overinterpreting price-to-earnings ratios when making investment decisions, although this can reveal a lot about what other market participants think about the company.

We have determined that Ollie’s Bargain Outlet Holdings maintains its moderate P / E through expected growth which is in line with the overall market as expected. At this point, investors believe that the potential for profit improvement or deterioration is not large enough to justify a high or low price-to-earnings ratio. Unless these conditions change, they will continue to support the share price at these levels.

Remember that there may be other risks. For example, we have identified 1 warning sign for Ollie’s Bargain Outlet Holdings that you need to be aware of.

If you are uncertain about the strength of the business of Ollie’s Bargain Outlet Holdings, why not explore our interactive list of stocks with solid trading fundamentals for other companies that you may have missed.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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