Sentiment Still Eluding KWS SAAT SE & Co. KGaA (ETR:KWS)

There wouldn't be many who think KWS SAAT SE & Co. KGaA's (ETR:KWS) price-to-earnings (or "P/E") ratio of 16.8x is worth a mention when the median P/E in Germany is similar at about 17x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

KWS SAAT SE KGaA has been struggling lately as its earnings have declined faster than most other companies. One possibility is that the P/E is moderate because investors think the company's earnings trend will eventually fall in line with most others in the market. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders may be a little nervous about the viability of the share price.

Check out our latest analysis for KWS SAAT SE KGaA

If you'd like to see what analysts are forecasting going forward, you should check out our free report on KWS SAAT SE KGaA.

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

KWS SAAT SE KGaA's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 14%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 17% per year during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 14% each year growth forecast for the broader market.

In light of this, it's curious that KWS SAAT SE KGaA's P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On KWS SAAT SE KGaA's P/E

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of KWS SAAT SE KGaA's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for KWS SAAT SE KGaA (1 makes us a bit uncomfortable) you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.