With a price-to-earnings (or "P/E") ratio of 25.7x Willis Towers Watson Public Limited Company (NASDAQ:WTW) may be sending very bearish signals at the moment, given that almost half of all companies in the United States have P/E ratios under 17x and even P/E's lower than 10x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.
Recent times have been pleasing for Willis Towers Watson 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. If not, then existing shareholders might be a little nervous about the viability of the share price.
NasdaqGS:WTW Price to Earnings Ratio vs Industry August 13th 2024 Want the full picture on analyst estimates for the company? Then our free report on Willis Towers Watson will help you uncover what's on the horizon.
How Is Willis Towers Watson's Growth Trending?
Willis Towers Watson's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.
Taking a look back first, we see that the company managed to grow earnings per share by a handy 5.7% last year. The latest three year period has also seen a 12% overall rise in EPS, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.
Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 19% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 11% each year, which is noticeably less attractive.
With this information, we can see why Willis Towers Watson is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
The Final Word
Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've established that Willis Towers Watson maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.
Before you take the next step, you should know about the 2 warning signs for Willis Towers Watson that we have uncovered.
You might be able to find a better investment than Willis Towers Watson. 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).
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Willis Towers Watson Public Limited Company(NASDAQ:WTW)的市盈率爲25.7倍,幾乎有一半以上的美國公司的市盈率低於17倍 ,甚至低於10倍的市盈率也並非罕見,這表明其目前可能發送非常消極的信號。 然而,我們需要深入挖掘,以確定高度提升的市盈率是否具有合理的基礎。