Adtalem Global Education Inc.'s (NYSE:ATGE) price-to-earnings (or "P/E") ratio of 20.7x 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 18x and even P/E's below 10x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.
Adtalem Global Education certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors' willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.
Although there are no analyst estimates available for Adtalem Global Education, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Is There Enough Growth For Adtalem Global Education?
The only time you'd be truly comfortable seeing a P/E as high as Adtalem Global Education's is when the company's growth is on track to outshine the market.
Retrospectively, the last year delivered an exceptional 54% gain to the company's bottom line. The latest three year period has also seen an excellent 196% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.
Comparing that to the market, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.
In light of this, it's understandable that Adtalem Global Education's P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.
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.
We've established that Adtalem Global Education maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Adtalem Global Education, and understanding them should be part of your investment process.
You might be able to find a better investment than Adtalem Global Education. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
Adtalem Global Education Inc.(NYSE:ATGE)的市盈率(或“P/E”)为20.7倍,与美国市场上大约一半的公司的P/E比18倍还低,甚至低于10倍的P/E也相当普遍相比,可能使其看起来像是一个卖出。然而,P/E可能之所以高是有原因的,需要进一步调查判断它是否合理。
Adtalem Global Education最近确实做得很好,因为其盈利增长速度非常快。似乎许多人都预期其强劲的盈利表现将在未来时期超过大多数其他公司,这增加了投资者愿意为股票支付更高价的意愿。如果不是这样,现有股东可能会对股价的可行性有些紧张。
尽管Adtalem Global Education没有可用的分析师预估数据,但请查看这个免费的数据丰富的可视化图表,以了解该公司在盈利、营业收入和现金流方面的表现。
Adtalem Global Education的增长是否足够?
唯一让您真正放心看到Adtalem Global Education这样高的P/E是当公司的增长正处于超越市场的轨道上。