There's Reason For Concern Over Schindler Holding AG's (VTX:SCHN) Price

Schindler Holding AG's (VTX:SCHN) price-to-earnings (or "P/E") ratio of 29.1x might make it look like a sell right now compared to the market in Switzerland, where around half of the companies have P/E ratios below 20x and even P/E's below 13x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

Schindler Holding certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Schindler Holding

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

Is There Enough Growth For Schindler Holding?

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

If we review the last year of earnings growth, the company posted a worthy increase of 13%. EPS has also lifted 5.8% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 6.5% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the market is forecast to expand by 13% per annum, which is noticeably more attractive.

With this information, we find it concerning that Schindler Holding is trading at a P/E higher than the market. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

What We Can Learn From Schindler 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.

Our examination of Schindler Holding's analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Schindler Holding with six simple checks on some of these key factors.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.