Learning Technologies Group plc's (LON:LTG) Earnings Haven't Escaped The Attention Of Investors

With a price-to-earnings (or "P/E") ratio of 20x Learning Technologies Group plc (LON:LTG) may be sending bearish signals at the moment, given that almost half of all companies in the United Kingdom have P/E ratios under 16x and even P/E's lower than 10x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Learning Technologies Group as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Learning Technologies Group

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

How Is Learning Technologies Group's Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like Learning Technologies Group's to be considered reasonable.

If we review the last year of earnings growth, the company posted a worthy increase of 6.8%. This was backed up an excellent period prior to see EPS up by 68% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 22% per year as estimated by the seven analysts watching the company. With the market only predicted to deliver 15% each year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Learning Technologies Group's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Learning Technologies Group'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.

We've established that Learning Technologies Group 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. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for Learning Technologies Group you should be aware of.

You might be able to find a better investment than Learning Technologies Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

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