When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 16x, you may consider DuPont de Nemours, Inc. (NYSE:DD) as a stock to avoid entirely with its 37.2x 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.
Recent times haven't been advantageous for DuPont de Nemours as its earnings have been falling quicker than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. If not, then existing shareholders may be very nervous about the viability of the share price.
See our latest analysis for DuPont de Nemours
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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 DuPont de Nemours' to be considered reasonable.
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 7.4%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.
Turning to the outlook, the next three years should generate growth of 31% per annum as estimated by the analysts watching the company. With the market only predicted to deliver 12% per year, the company is positioned for a stronger earnings result.
In light of this, it's understandable that DuPont de Nemours' 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 Bottom Line On DuPont de Nemours' P/E
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 DuPont de Nemours maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. 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 1 warning sign for DuPont de Nemours 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.
米国の約半数の企業の株価収益率(P / E)が16倍未満の場合、DuPont de Nemours、Inc.(NYSE:DD)は、その37.2倍のP / E比率のために完全に避けるべき株式として考慮することができます。それでも、我々はより深く掘り下げて、非常に高いP / Eの合理的な根拠があるかどうかを判断する必要があります。
最近の時代はDuPont de Nemoursにとって有利ではなく、収益はほとんどの他の企業よりも速く落ちています。一つの可能性は、投資家が会社が完全に物事を転換し、市場のほとんどの他の企業を加速すると考えているため、P / Eが高いということです。そうでない場合、既存の株主は株価の持続可能性に非常に神経質になる可能性があります。
DuPont de Nemoursに関する最新分析をご覧ください
アナリストが将来を予測しているのを見たい場合は、DuPont de Nemoursの無料レポートをチェックする必要があります。
成長メトリックは高いP / Eについて何を言っているのですか?
DuPont de NemoursのようなP / E比率で合理的と見なすには、会社が市場を大幅に上回るという前提があります。