Xcel Energy Inc.'s (NASDAQ:XEL) price-to-earnings (or "P/E") ratio of 20.2x 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 16x and even P/E's below 9x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.
With its earnings growth in positive territory compared to the declining earnings of most other companies, Xcel Energy 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.
See our latest analysis for Xcel Energy
NasdaqGS:XEL Price to Earnings Ratio vs Industry January 9th 2024 Want the full picture on analyst estimates for the company? Then our free report on Xcel Energy will help you uncover what's on the horizon.
Does Growth Match The High P/E?
There's an inherent assumption that a company should outperform the market for P/E ratios like Xcel Energy's to be considered reasonable.
If we review the last year of earnings growth, the company posted a worthy increase of 2.9%. The latest three year period has also seen a 12% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been respectable for the company.
Shifting to the future, estimates from the twelve analysts covering the company suggest earnings should grow by 8.3% per annum over the next three years. Meanwhile, the rest of the market is forecast to expand by 12% per annum, which is noticeably more attractive.
With this information, we find it concerning that Xcel Energy 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 Bottom Line On Xcel Energy's P/E
While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.
We've established that Xcel Energy currently trades on a much higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.
You need to take note of risks, for example - Xcel Energy has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.
It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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Xcel Energy Inc. 's(纳斯达克股票代码:XEL)的市盈率(或 “市盈率”)为20.2倍,与美国市场相比,目前可能看起来像卖出。在美国,约有一半公司的市盈率低于16倍,甚至市盈率低于9倍也很常见。尽管如此,我们需要更深入地挖掘以确定市盈率上升是否有合理的基础。