WillScot Mobile Mini Holdings Corp.'s (NASDAQ:WSC) price-to-earnings (or "P/E") ratio of 22.7x might make it look like a sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 17x and even P/E's below 9x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.
Recent times have been pleasing for WillScot Mobile Mini Holdings as its earnings have risen in spite of the market's earnings going into reverse. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors' willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
NasdaqCM:WSC Price to Earnings Ratio vs Industry June 5th 2024 If you'd like to see what analysts are forecasting going forward, you should check out our free report on WillScot Mobile Mini Holdings.
How Is WillScot Mobile Mini Holdings' Growth Trending?
In order to justify its P/E ratio, WillScot Mobile Mini Holdings would need to produce impressive growth in excess of the market.
If we review the last year of earnings growth, the company posted a worthy increase of 12%. Still, EPS has barely risen at all in aggregate from three years ago, which is not ideal. 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 19% each year as estimated by the ten analysts watching the company. That's shaping up to be materially higher than the 9.9% per annum growth forecast for the broader market.
In light of this, it's understandable that WillScot Mobile Mini Holdings' P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
The Key Takeaway
It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
As we suspected, our examination of WillScot Mobile Mini Holdings' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
Before you take the next step, you should know about the 2 warning signs for WillScot Mobile Mini Holdings (1 is a bit unpleasant!) that we have uncovered.
Of course, you might also be able to find a better stock than WillScot Mobile Mini Holdings. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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