Nordstrom Stock Jumps 30% on Investor Optimism Despite Lagging Returns
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Nordstrom's share price has jumped 30% recently, but its 7.7% annual share price return over the last year is less impressive. Its high P/E ratio of 25.1x suggests the stock may be overvalued.
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Nordstrom's earnings have been declining and compare poorly to industry averages, raising questions about whether the high P/E ratio is justified.
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Analysts forecast strong EPS growth of 66% per year over the next 3 years, which helps explain investor bullishness and the high P/E.
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Investors seem confident in the projected high future earnings growth and are willing to pay a premium price now, keeping the P/E ratio elevated.
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It remains to be seen whether Nordstrom can deliver on the strong profit growth expected. Its high P/E makes the stock price vulnerable if growth stalls.