Ashland’s one-year forward PE multiple
Forward PE is one of the valuation methods that factor in a company’s future earnings estimations. It helps investors compare two or more companies operating in the same industry to assess which company is undervalued and which is overvalued.
Is Ashland overvalued?
Ashland saw strong fiscal second-quarter earnings. It reported adjusted EPS of $1.06. Banking on higher revenue, along with a possible buyback of shares and plans to reduce its selling, general, and administrative expenses by $120 million related to its Corporate and Specialty Ingredients segment, ASH expects its fiscal 2018 EPS to be in the range of $3.30–$3.50.
In the next four quarters, analysts expect ASH’s adjusted EPS to be $3.70, an increase of 19.7% on a year-over-year basis. Analysts expect CE’s adjusted EPS to rise 9.2%, indicating that ASH’s adjusted EPS growth is expected to be more than double CE’s. Hence, ASH is trading at a premium and is in line with its adjusted EPS growth rate.
Investors can indirectly hold Ashland by investing in the iShares Edge MSCI Min Vol USA Small-Cap ETF (SMMV), which has invested 0.4% of its portfolio in Ashland as of May 25. The fund also provides exposure to Brown & Brown (BRO) and Steris (STE) at weights of 0.7% each.