Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s (DSM:QGTS) P/E Is On The Mark

When close to half the companies in Qatar have price-to-earnings ratios (or "P/E's") below 12x, you may consider Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) as a stock to potentially avoid with its 14.7x 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 as high as it is.

Recent times have been advantageous for Qatar Gas Transport Company Limited (Nakilat) (QPSC) as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Qatar Gas Transport Company Limited (Nakilat) (QPSC)

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Does Growth Match The High P/E?

Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

If we review the last year of earnings growth, the company posted a worthy increase of 12%. The solid recent performance means it was also able to grow EPS by 29% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 11% each year during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 4.7% per year growth forecast for the broader market.

In light of this, it's understandable that Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s 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.

The Final Word

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Qatar Gas Transport Company Limited (Nakilat) (QPSC) you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.