Stock Analysis
- France
- /
- Aerospace & Defense
- /
- ENXTPA:AM
Why Investors Shouldn't Be Surprised By Dassault Aviation société anonyme's (EPA:AM) P/E
When close to half the companies in France have price-to-earnings ratios (or "P/E's") below 14x, you may consider Dassault Aviation société anonyme (EPA:AM) as a stock to potentially avoid with its 19.9x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.
Dassault Aviation société anonyme certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.
Check out our latest analysis for Dassault Aviation société anonyme
Want the full picture on analyst estimates for the company? Then our free report on Dassault Aviation société anonyme will help you uncover what's on the horizon.Does Growth Match The High P/E?
There's an inherent assumption that a company should outperform the market for P/E ratios like Dassault Aviation société anonyme's to be considered reasonable.
If we review the last year of earnings growth, the company posted a worthy increase of 4.7%. Pleasingly, EPS has also lifted 78% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 20% each year during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 14% per year growth forecast for the broader market.
With this information, we can see why Dassault Aviation société anonyme is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Bottom Line On Dassault Aviation société anonyme's P/E
We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that Dassault Aviation société anonyme 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.
Having said that, be aware Dassault Aviation société anonyme is showing 1 warning sign in our investment analysis, you should know about.
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.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About ENXTPA:AM
Dassault Aviation société anonyme
Designs and manufactures military aircraft, business jets, and space systems in France, the Americas, and internationally.