When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 16x, you may consider Arthur J. Gallagher & Co. (NYSE:AJG) as a stock to avoid entirely with its 43.4x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.
Recent times have been pleasing for Arthur J. Gallagher 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.
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NYSE:AJG Price to Earnings Ratio vs Industry January 9th 2024 Want the full picture on analyst estimates for the company? Then our free report on Arthur J. Gallagher will help you uncover what's on the horizon.
What Are Growth Metrics Telling Us About The High P/E?
There's an inherent assumption that a company should far outperform the market for P/E ratios like Arthur J. Gallagher's to be considered reasonable.
Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. Regardless, EPS has managed to lift by a handy 29% in aggregate from three years ago, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 22% per year during the coming three years according to the ten analysts following the company. With the market only predicted to deliver 12% per annum, the company is positioned for a stronger earnings result.
In light of this, it's understandable that Arthur J. Gallagher's 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 Bottom Line On Arthur J. Gallagher's P/E
Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
As we suspected, our examination of Arthur J. Gallagher's 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.
Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Arthur J. Gallagher that you should be aware of.
If these risks are making you reconsider your opinion on Arthur J. Gallagher, explore our interactive list of high quality stocks to get an idea of what else is out there.
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.
アメリカの上場企業の約半数がP/E比16倍以下である状況下では、Arthur J. Gallagher & Co.(NYSE:AJG)はP/E比43.4倍と非常に高いため、株式全体を避ける株式と考えられます。しかし、この高いP/E比は理由があるかもしれず、正当化されるかどうかを判断するために更なる調査が必要です。
私たちが予想した通り、Arthur J. Gallagherのアナリスト予想を調べることで、同社の優れた収益見通しが高いP/Eに貢献していることがわかりました。現在、株主たちは将来の収益に脅威がないことをかなり自信を持っているため、P/Eには満足しています。これらの状況が変化しない限り、同社は引き続き株価に強力なサポートを提供し続けることになるでしょう。
Arthur J. Gallagherに潜む4つの警告サインなど、他にもリスクが存在することを忘れないでください。
もしリスクを考慮してArthur J. Gallagherに対する意見を再考する必要がある場合は、インタラクティブな高品質株リストをご覧いただき、他にも何があるかを確認してください。
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オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。