Market Participants Recognise Coca-Cola Europacific Partners PLC's (AMS:CCEP) Earnings

When close to half the companies in the Netherlands have price-to-earnings ratios (or "P/E's") below 22x, you may consider Coca-Cola Europacific Partners PLC (AMS:CCEP) as a stock to avoid entirely with its 44.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

While the market has experienced earnings growth lately, Coca-Cola Europacific Partners' earnings have gone into reverse gear, which is not great. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Check out 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.

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

There's an inherent assumption that a company should far outperform the market for P/E ratios like Coca-Cola Europacific Partners' to be considered reasonable.

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 53%. As a result, earnings from three years ago have also fallen 23% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 48% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 18% each year, which is noticeably less attractive.

In light of this, it's understandable that Coca-Cola Europacific Partners' P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From 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.

As we suspected, our examination of Coca-Cola Europacific Partners' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Coca-Cola Europacific Partners that you should be aware of.

If these risks are making you reconsider your opinion on Coca-Cola Europacific Partners, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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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