CSG Systems International, Inc.'s (NASDAQ:CSGS) price-to-earnings (or "P/E") ratio of 19.6x 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.
CSG Systems International certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. 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.
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What Are Growth Metrics Telling Us About The High P/E?
There's an inherent assumption that a company should outperform the market for P/E ratios like CSG Systems International's to be considered reasonable.
If we review the last year of earnings growth, the company posted a terrific increase of 85%. As a result, it also grew EPS by 22% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.
Shifting to the future, estimates from the eight analysts covering the company suggest earnings should grow by 7.2% each year over the next three years. Meanwhile, the rest of the market is forecast to expand by 13% each year, which is noticeably more attractive.
With this information, we find it concerning that CSG Systems International is trading at a P/E higher than the market. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.
The Final Word
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.
Our examination of CSG Systems International's analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. 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.
It is also worth noting that we have found 1 warning sign for CSG Systems International that you need to take into consideration.
If these risks are making you reconsider your opinion on CSG Systems International, 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.
CSG Systems International, Inc.s(纳斯达克股票代码:CSGS)的市盈率(或 “市盈率”)为19.6倍,与美国市场相比,目前可能看起来像卖出,美国约有一半的公司的市盈率低于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。
CSG Systems International最近确实做得很好,因为其收益增长是正的,而大多数其他公司的收益却在倒退。看来许多人预计该公司将继续克服更广泛的市场逆境,这增加了投资者购买股票的意愿。你真的希望如此,否则你会无缘无故地付出相当大的代价。
查看我们对 CSG Systems International 的最新分析
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关于高市盈率,增长指标告诉我们什么?
人们固有的假设是,如果像CSG Systems International这样的市盈率被认为是合理的,公司的表现应该超过市场。