Kardex Holding AG (VTX:KARN) Not Flying Under The Radar

With a price-to-earnings (or "P/E") ratio of 32.2x Kardex Holding AG (VTX:KARN) may be sending very bearish signals at the moment, given that almost half of all companies in Switzerland have P/E ratios under 18x and even P/E's lower than 12x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Kardex Holding 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. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for Kardex Holding

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Kardex Holding.

Is There Enough Growth For Kardex Holding?

The only time you'd be truly comfortable seeing a P/E as steep as Kardex Holding's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 34% gain to the company's bottom line. As a result, it also grew EPS by 30% 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.

Turning to the outlook, the next three years should generate growth of 13% each year as estimated by the seven analysts watching the company. That's shaping up to be materially higher than the 8.6% per year growth forecast for the broader market.

With this information, we can see why Kardex Holding is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Kardex Holding's 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.

We've established that Kardex Holding 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 settle on your opinion, we've discovered 1 warning sign for Kardex Holding that you should be aware of.

Of course, you might also be able to find a better stock than Kardex Holding. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.