Techtronic Industries Company Limited's (HKG:669) Share Price Not Quite Adding Up

Simply Wall St.10-16

Techtronic Industries Company Limited's (HKG:669) price-to-earnings (or "P/E") ratio of 25.5x might make it look like a strong sell right now compared to the market in Hong Kong, where around half of ...

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Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.     Techtronic Industries certainly has been doing a good job lately as it's been growing earnings more than most other companies.   The P/E is probably high because investors think this strong earnings performance will continue.  If not, then existing shareholders might be a little nervous about the viability of the share price.      Check out our latest analysis for Techtronic Industries SEHK:669 Price to Earnings Ratio vs Industry October 15th 2024 Want the full picture on analyst estimates for the company? Then our free report on Techtronic Industries will help you uncover what's on the horizon.   What Are Growth Metrics Telling Us About The High P/E?   In order to justify its P/E ratio, Techtronic Industries would need to produce outstanding growth well in excess of the market.   If we review the last year of earnings growth, the company posted a worthy increase of 7.9%.   The latest three year period has also seen a 5.7% overall rise in EPS, aided somewhat by its short-term performance.  Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.     Turning to the outlook, the next three years should generate growth of 14%  per annum as estimated by the analysts watching the company.  That's shaping up to be similar to the 12% per annum growth forecast for the broader market.  With this information, we find it interesting that Techtronic Industries is trading at a high P/E compared to the market.  It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock.  Although, additional gains will be difficult to achieve as this level of earnings growth is likely to weigh down the share price eventually.    The Bottom Line On Techtronic Industries' P/E  It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.  Our examination of Techtronic Industries' analyst forecasts revealed that its market-matching earnings outlook isn't impacting its high P/E as much as we would have predicted.  Right now we are uncomfortable with the relatively high share price as the predicted future earnings aren't likely to support such positive sentiment for long.  Unless these conditions improve, it's challenging to accept these prices as being reasonable.      Many other vital risk factors can be found on the company's balance sheet.  Take a look at our free balance sheet analysis for Techtronic Industries with six simple checks on some of these key factors.   You might be able to find a better investment than Techtronic Industries. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings). Valuation is complex, but we're here to simplify it.Discover if Techtronic Industries might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.Access Free AnalysisHave 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.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2475645411"}