Coca-Cola Europacific Partners PLC's (AMS:CCEP) Business Is Trailing The Market But Its Shares Aren't

When close to half the companies in the Netherlands have price-to-earnings ratios (or "P/E's") below 17x, you may consider Coca-Cola Europacific Partners PLC (AMS:CCEP) as a stock to potentially avoid with its 20x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Coca-Cola Europacific Partners hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Coca-Cola Europacific Partners

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Coca-Cola Europacific Partners.

How Is Coca-Cola Europacific Partners' Growth Trending?

Coca-Cola Europacific Partners' P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than 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 5.3%. Still, the latest three year period has seen an excellent 158% overall rise in EPS, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 13% each year during the coming three years according to the analysts following the company. That's shaping up to be similar to the 14% per annum growth forecast for the broader market.

With this information, we find it interesting that Coca-Cola Europacific Partners is trading at a high P/E compared to the market. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for disappointment if the P/E falls to levels more in line with the growth outlook.

The Bottom Line On Coca-Cola Europacific Partners' 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 Coca-Cola Europacific Partners' analyst forecasts revealed that its market-matching earnings outlook isn't impacting its high P/E as much as we would have predicted. Right now we are uncomfortable with the relatively high share price as the predicted future earnings aren't likely to support such positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you take the next step, you should know about the 3 warning signs for Coca-Cola Europacific Partners that we have uncovered.

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.