When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 16x, you may consider Corteva, Inc. (NYSE:CTVA) as a stock to avoid entirely with its 40.5x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.
With earnings that are retreating more than the market's of late, Corteva has been very sluggish. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
NYSE:CTVA Price to Earnings Ratio vs Industry March 4th 2024 Keen to find out how analysts think Corteva's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Enough Growth For Corteva?
Corteva'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, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 22%. Still, the latest three year period has seen an excellent 35% overall rise in EPS, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.
Turning to the outlook, the next three years should generate growth of 35% each year as estimated by the analysts watching the company. With the market only predicted to deliver 11% per annum, the company is positioned for a stronger earnings result.
In light of this, it's understandable that Corteva's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Key Takeaway
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 Corteva 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.
You always need to take note of risks, for example - Corteva has 1 warning sign we think you should be aware of.
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.
アメリカの半数近くの企業がP/E比16倍以下であるなか、Corteva, Inc. (NYSE:CTVA)の40.5倍のP/E比では株式の買いを避けることが考えられます。しかし、高いP/E比に理性的な根拠があるかどうかを判断するためには、もう少し掘り下げる必要があります。
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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。