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Harte Hanks, Inc. (NASDAQ:HHS) stock catapults 25% to its price and trading even though it still lags the market

Despite an already strong run, Harte Hanks, Inc. ( NASDAQ:HHS ) shares have been powering through with a 25% gain over the past thirty days. Year-to-date gains come in at 141% after the recent rally, making investors sit up and take notice.

Although its price has risen sharply, Harte Hanks’ price-to-earnings (or “P/E”) ratio of 9.1x may look like a buy right now compared to the market in the United States, where nearly half of companies have P/E ratios above 16x and P/Es above 32x are common. . Nevertheless, we need to dig a little deeper to determine if there is a rational basis for a reduced P/E.

With better earnings growth than other companies of late, Harte Hanks has been doing relatively well. Many expect the strong earnings performance that suppressed the P/E to decline substantially. If you like the company, you hope this isn’t the case, so you can potentially pick up some stock while you’re out of favor.

View our latest analysis for Harte Hanks

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Are analysts eager to find out how Harte Hanks’ prospects stack up against the industry? In that case, our Free A report is a good place to start.

How is Harte Hanks’ growth trending?

You’d be really comfortable looking at a P/E as low as Harte Hanks when the company’s growth is on track to underperform the market.

Looking back first, we see that the company grew earnings per share by an impressive 69% last year. Still, EPS overall is up slightly from three years ago, which isn’t ideal. So it seems to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, next year should bring lower revenue, with Twin analysts watching the company estimating earnings to fall 18%. The market is predicted to deliver 8.9% growth, which is a disappointing result.

With this information, we are not surprised that Harte Hanks is trading at a lower P/E than the market. However, shrinking earnings are unlikely to lead to a stable P/E over the long term. These prices may also be difficult to maintain as the weak outlook continues to weigh on stocks.

The key takeaway

Harte may have given Hanks’ stock a solid boost, but its P/E certainly hasn’t reached any great heights. While the price-to-earnings ratio shouldn’t be the deciding factor in whether you buy a stock, it’s a fairly robust measure of earnings prospects.

As we suspected, our examination of analyst forecasts for Harte Hanks revealed that a shrinking earnings outlook is contributing to its low P/E. Right now shareholders are accepting a low P/E because they accept that future earnings probably won’t provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier to the share price around these levels.

There are other important risk factors to consider before investing and we have discovered 1 warning sign for Harte Hanks You should know that.

If you are interested in P/E ratiosYou might want to look into this Free A collection of other companies that have grown earnings strongly and trade at less than 20x P/E.

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

This article by Simply Wall Saint is general in nature. We provide commentary based on historical data and analyst forecasts and our articles are not intended to be financial advice. It does not recommend buying or selling any stock and does not take into account your objectives or your financial situation. We aim to bring you long-term focused analytics powered by fundamental data. Note that our analysis does not account for recent price-sensitive company announcements or qualitative material. Simply Wall St. has no position in any of the stocks mentioned.

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