Watts Water Technologies, Inc.'s (NYSE:WTS) Business Is Yet to Catch Up With Its Share Price
Watts Water Technologies, Inc.'s (NYSE:WTS) Business Is Yet to Catch Up With Its Share Price
Watts Water Technologies, Inc.'s (NYSE:WTS) price-to-earnings (or "P/E") ratio of 26.3x might make it look like a strong 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 highly elevated P/E.
Recent times have been pleasing for Watts Water Technologies 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.
Keen to find out how analysts think Watts Water Technologies' future stacks up against the industry? In that case, our free report is a great place to start.Is There Enough Growth For Watts Water Technologies?
In order to justify its P/E ratio, Watts Water Technologies would need to produce outstanding growth well in excess of the market.
Retrospectively, the last year delivered a decent 4.5% gain to the company's bottom line. Pleasingly, EPS has also lifted 133% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Turning to the outlook, the next three years should generate growth of 8.7% each year as estimated by the eight analysts watching the company. With the market predicted to deliver 11% growth each year, the company is positioned for a comparable earnings result.
With this information, we find it interesting that Watts Water Technologies is trading at a high P/E compared to the market. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of earnings growth is likely to weigh down the share price eventually.
What We Can Learn From Watts Water Technologies' 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 Watts Water Technologies currently trades on a higher than expected P/E since its forecast growth is only in line with the wider market. When we see an average earnings outlook with market-like growth, we suspect the share price is at risk of declining, sending the high P/E lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
Plus, you should also learn about this 1 warning sign we've spotted with Watts Water Technologies.
If these risks are making you reconsider your opinion on Watts Water Technologies, 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.
Watts Water Technologiess(紐約證券交易所代碼:WTS)市盈率(或 “市盈率”)爲26.3倍,與美國市場相比,目前看上去像是強勁的拋售。在美國,約有一半公司的市盈率低於16倍,甚至市盈率低於9倍也很常見。儘管如此,我們需要更深入地挖掘,以確定市盈率大幅上漲是否有合理的基礎。
最近令瓦茨水務技術公司感到高興,儘管市場收益出現逆轉,但其收益卻有所增加。看來許多人預計該公司將繼續克服更廣泛的市場逆境,這增加了投資者購買股票的意願。如果不是,那麼現有股東可能會對股價的可行性有些緊張。
想了解分析師如何看待沃茨水務科技的未來與該行業的對立嗎?在這種情況下,我們的免費報告是一個很好的起點。沃茨水務科技的增長是否足夠?
爲了證明其市盈率是合理的,Watts Water Technologies需要實現遠遠超過市場的出色增長。
回顧過去,去年的公司利潤實現了4.5%的可觀增長。令人高興的是,每股收益也比三年前增長了133%,這在一定程度上要歸功於過去12個月的增長。因此,可以公平地說,該公司最近的收益增長非常好。
展望來看,根據關注該公司的八位分析師的估計,未來三年每年將實現8.7%的增長。預計市場每年將實現11%的增長,該公司有望實現可比的收益業績。
有了這些信息,我們發現有趣的是,與市場相比,Watts Water Technologies的市盈率很高。顯然,該公司的許多投資者比分析師所表示的更爲看漲,並且不願意立即放棄股票。但是,由於這種收益增長水平最終可能會壓低股價,因此很難實現額外的收益。
我們可以從沃茨水務科技的市盈率中學到什麼?
雖然市盈率不應該是決定你是否買入股票的決定性因素,但它是衡量收益預期的有力晴雨表。
我們已經確定,Watts Water Technologies目前的市盈率高於預期,因爲其預測的增長僅與整個市場一致。當我們看到具有類似市場增長的平均收益前景時,我們懷疑股價有下跌的風險,從而使高市盈率走低。這使股東的投資面臨風險,潛在投資者面臨支付不必要的溢價的危險。
另外,你還應該了解我們在沃茨水務科技公司發現的這1個警告標誌。
如果這些風險讓你重新考慮對Watts Water Technologies的看法,請瀏覽我們的互動式高質量股票清單,了解還有什麼。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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