Advertisement
Australia markets close in 3 hours 12 minutes
  • ALL ORDS

    8,129.00
    +8.80 (+0.11%)
     
  • ASX 200

    7,856.80
    +5.10 (+0.06%)
     
  • AUD/USD

    0.6674
    +0.0004 (+0.06%)
     
  • OIL

    79.06
    -0.20 (-0.25%)
     
  • GOLD

    2,421.60
    -4.30 (-0.18%)
     
  • Bitcoin AUD

    104,933.95
    -1,944.89 (-1.82%)
     
  • CMC Crypto 200

    1,523.11
    +34.57 (+2.32%)
     
  • AUD/EUR

    0.6144
    +0.0005 (+0.08%)
     
  • AUD/NZD

    1.0872
    -0.0063 (-0.57%)
     
  • NZX 50

    11,723.46
    +47.47 (+0.41%)
     
  • NASDAQ

    18,713.80
    +39.61 (+0.21%)
     
  • FTSE

    8,416.45
    -7.75 (-0.09%)
     
  • Dow Jones

    39,872.99
    +66.22 (+0.17%)
     
  • DAX

    18,726.76
    -42.20 (-0.22%)
     
  • Hang Seng

    19,302.97
    +82.35 (+0.43%)
     
  • NIKKEI 225

    38,719.35
    -227.58 (-0.58%)
     

Bulletin Resources Limited (ASX:BNR) Stock Rockets 34% As Investors Are Less Pessimistic Than Expected

Bulletin Resources Limited (ASX:BNR) shareholders have had their patience rewarded with a 34% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 31% in the last twelve months.

After such a large jump in price, Bulletin Resources' price-to-earnings (or "P/E") ratio of 41.2x might make it look like a strong sell right now compared to the market in Australia, where around half of the companies have P/E ratios below 18x and even P/E's below 9x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

Bulletin Resources has been doing a decent job lately as it's been growing earnings at a reasonable pace. One possibility is that the P/E is high because investors think this good earnings growth will be enough to outperform the broader market in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Bulletin Resources

pe-multiple-vs-industry
pe-multiple-vs-industry

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Bulletin Resources' earnings, revenue and cash flow.

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as Bulletin Resources' is when the company's growth is on track to outshine the market decidedly.

ADVERTISEMENT

Taking a look back first, we see that the company managed to grow earnings per share by a handy 5.0% last year. However, due to its less than impressive performance prior to this period, EPS growth is practically non-existent over the last three years overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing that to the market, which is predicted to deliver 20% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's alarming that Bulletin Resources' P/E sits above the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

What We Can Learn From Bulletin Resources' P/E?

Shares in Bulletin Resources have built up some good momentum lately, which has really inflated its P/E. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Bulletin Resources currently trades on a much higher than expected P/E since its recent three-year growth is lower than the wider market forecast. Right now we are increasingly uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Plus, you should also learn about these 4 warning signs we've spotted with Bulletin Resources.

You might be able to find a better investment than Bulletin Resources. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 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.