Mannatech, Incorporated (NASDAQ: MTEX) Rises 27% But Its Low P / E Is No Reason For Excitement
Mannatech, incorporated (NASDAQ: MTEX) Stocks continued their recent momentum, gaining 27% in the last month alone. Looking a little deeper, it’s encouraging to see that the stock rose 62% last year.
Although its price has risen, Mannatech can still send very bullish signals for now with its price-to-earnings (or “P / E”) ratio of 9.6x, since nearly half of all companies in the United States have P Ratios / E greater than 20x and even P / E greater than 39x are not unusual. Nonetheless, we would need to dig a little deeper to determine if there is a rational basis for the heavily reduced P / E.
Profits have risen sharply for Mannatech recently, which is nice to see. One possibility is that the P / E is low because investors believe this respectable earnings growth could actually underperform the market as a whole in the near future. If this does not happen, existing shareholders have reason to be optimistic about the future direction of the share price.
NasdaqGS: MTEX price based on past earnings as of May 29, 2021
free data rich visualization
How is Mannatech’s growth evolving?
There is an inherent assumption that a company would have to underperform the market well for P / E ratios like Mannatech’s to be considered reasonable.
Looking back first, we see that the company increased its earnings per share by an impressive 17% last year. However, its long-term performance has not been as strong, with three-year EPS growth being relatively nonexistent overall. Therefore, it is fair to say that earnings growth has recently been inconsistent for the company.
Comparing that to the market, which is expected to generate 17% growth over the next 12 months, the company’s momentum is weaker based on recent mid-term annualized earnings results.
With this information we can see why Mannatech is trading at a lower P / E than the market. It appears that most investors expect the recent limited growth rates to continue into the future and are only willing to pay a reduced amount for the stock.
The key to take away
Mannatech’s recent rise in share price still sees its P / E resting firmly flat on the ground. It is argued that the price / earnings ratio is a lower measure of value in some industries, but it can be a powerful indicator of the business climate.
We have determined that Mannatech maintains its low P / E as the weakness of its recent three-year growth is lower than expected for the market as a whole, as expected. Right now, shareholders are accepting the low P / E as they concede that future earnings are unlikely to provide any pleasant surprises. Unless recent medium-term conditions improve, they will continue to act as a barrier to the share price around these levels.
Before you decide on your opinion, we found out 3 warning signs for Mannatech that you need to be aware of.
You may be able to find a better investment than Mannatech. If you want a selection of possible candidates, check out this free List of interesting companies that trade with less than 20x P / E (but have proven they can increase their profits).
This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take into account your goals or your financial situation. We aim 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 information. Simply Wall St has no position in any of the stocks mentioned.
Do you have any comments on this article? Concerned about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.