The Price Is Right For Meier Tobler Group AG (VTX:MTG)

With a price-to-earnings (or "P/E") ratio of 48.9x Meier Tobler Group AG (VTX:MTG) may be sending very bearish signals at the moment, given that almost half of all companies in Switzerland have P/E ratios under 24x and even P/E's lower than 16x 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.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Meier Tobler Group has been doing quite well of late. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Meier Tobler Group

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

What Are Growth Metrics Telling Us About The High P/E?

In order to justify its P/E ratio, Meier Tobler Group would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 193% gain to the company's bottom line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest earnings should grow by 67% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 14% per annum, which is noticeably less attractive.

With this information, we can see why Meier Tobler Group 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.

The Bottom Line On Meier Tobler Group's 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.

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

We don't want to rain on the parade too much, but we did also find 1 warning sign for Meier Tobler Group that you need to be mindful of.

If you're unsure about the strength of Meier Tobler Group's 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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