Halozyme Therapeutics, Inc. (NASDAQ:HALO) Stock Rockets 27% But Many Are Still Ignoring The Company

The Halozyme Therapeutics, Inc. (NASDAQ:HALO) share price has done very well over the last month, posting an excellent gain of 27%. Looking further back, the 14% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 19x, you may still consider Halozyme Therapeutics as an attractive investment with its 14.9x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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With earnings growth that's superior to most other companies of late, Halozyme Therapeutics has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Halozyme Therapeutics

What Are Growth Metrics Telling Us About The Low P/E?

In order to justify its P/E ratio, Halozyme Therapeutics would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 71% last year. Pleasingly, EPS has also lifted 81% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 27% per year over the next three years. With the market only predicted to deliver 11% per annum, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Halozyme Therapeutics' P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Halozyme Therapeutics' P/E

Despite Halozyme Therapeutics' shares building up a head of steam, its P/E still lags most other companies. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Halozyme Therapeutics currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Halozyme Therapeutics that you should be aware of.

If these risks are making you reconsider your opinion on Halozyme Therapeutics, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.