When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 17x, you may consider Keurig Dr Pepper Inc. (NASDAQ:KDP) as a stock to potentially avoid with its 22.9x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.
With its earnings growth in positive territory compared to the declining earnings of most other companies, Keurig Dr Pepper has been doing quite well of late. 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.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Keurig Dr Pepper.
How Is Keurig Dr Pepper's Growth Trending?
There's an inherent assumption that a company should outperform the market for P/E ratios like Keurig Dr Pepper's to be considered reasonable.
If we review the last year of earnings growth, the company posted a terrific increase of 39%. The strong recent performance means it was also able to grow EPS by 38% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.
Turning to the outlook, the next three years should generate growth of 7.9% per annum as estimated by the analysts watching the company. That's shaping up to be materially lower than the 10% per year growth forecast for the broader market.
With this information, we find it concerning that Keurig Dr Pepper is trading at a P/E higher than the market. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of earnings growth is likely to weigh heavily on the share price eventually.
The Final Word
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 Keurig Dr Pepper currently trades on a much higher than expected P/E since its forecast growth is lower than the wider market. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.
Before you take the next step, you should know about the 2 warning signs for Keurig Dr Pepper (1 is a bit concerning!) that we have uncovered.
Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.
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.
当将近一半的美国公司的市盈率(或 “市盈率”)低于17倍时,你可以考虑将Keurig Dr Pepper Inc.(纳斯达克股票代码:KDP)的市盈率(或市盈率为22.9倍)作为可能避开的股票。但是,仅按面值计算市盈率是不明智的,因为可以解释为什么市盈率如此之高。
与大多数其他公司的收益下降相比,Keurig Dr Pepper的收益增长处于正值区间,最近表现良好。看来许多人预计该公司将继续克服更广泛的市场逆境,这增加了投资者购买股票的意愿。你真的希望如此,否则你会无缘无故地付出相当大的代价。
如果你想了解分析师对未来的预测,你应该查看我们关于Keurig Dr Pepper的免费报告。
Keurig Dr Pepper 的增长趋势如何?
人们固有的假设是,如果像Keurig Dr Pepper这样的市盈率被认为是合理的,公司的表现应该超过市场。