Investors Appear Satisfied With Taseko Mines Limited's (TSE:TKO) Prospects

With a price-to-earnings (or "P/E") ratio of 19.9x Taseko Mines Limited (TSE:TKO) may be sending bearish signals at the moment, given that almost half of all companies in Canada have P/E ratios under 14x and even P/E's lower than 8x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Taseko Mines as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Taseko Mines

Keen to find out how analysts think Taseko Mines' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Taseko Mines' Growth Trending?

Taseko Mines' P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Retrospectively, the last year delivered an exceptional 158% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 365% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 71% per annum as estimated by the six analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 8.4% each year, which is noticeably less attractive.

In light of this, it's understandable that Taseko Mines' P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Taseko Mines' P/E

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.

As we suspected, our examination of Taseko Mines' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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.

Plus, you should also learn about these 3 warning signs we've spotted with Taseko Mines (including 1 which shouldn't be ignored).

If you're unsure about the strength of Taseko Mines' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.