Helmerich & Payne, Inc. (NYSE:HP) Looks Inexpensive After Falling 26% But Perhaps Not Attractive Enough

Unfortunately for some shareholders, the Helmerich & Payne, Inc. (NYSE:HP) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 56% loss during that time.

Even after such a large drop in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 16x, you may still consider Helmerich & Payne as a highly attractive investment with its 6.3x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

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While the market has experienced earnings growth lately, Helmerich & Payne's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Helmerich & Payne

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Helmerich & Payne .

Is There Any Growth For Helmerich & Payne?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Helmerich & Payne's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 28%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next three years should generate growth of 4.4% each year as estimated by the eleven analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 11% per annum, which is noticeably more attractive.

With this information, we can see why Helmerich & Payne is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Shares in Helmerich & Payne have plummeted and its P/E is now low enough to touch the ground. 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 Helmerich & Payne maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Helmerich & Payne (of which 1 shouldn't be ignored!) you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.