Qatar Insurance Company Q.S.P.C.'s (DSM:QATI) P/E Still Appears To Be Reasonable

With a price-to-earnings (or "P/E") ratio of 19x Qatar Insurance Company Q.S.P.C. (DSM:QATI) may be sending bearish signals at the moment, given that almost half of all companies in Qatar have P/E ratios under 13x and even P/E's lower than 11x are not unusual. 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.

While the market has experienced earnings growth lately, Qatar Insurance Company Q.S.P.C's 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 Qatar Insurance Company Q.S.P.C

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Qatar Insurance Company Q.S.P.C.

Is There Enough Growth For Qatar Insurance Company Q.S.P.C?

There's an inherent assumption that a company should outperform the market for P/E ratios like Qatar Insurance Company Q.S.P.C's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 32%. At least EPS has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to climb by 155% during the coming year according to the one analyst following the company. That's shaping up to be materially higher than the 10% growth forecast for the broader market.

In light of this, it's understandable that Qatar Insurance Company Q.S.P.C'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 Qatar Insurance Company Q.S.P.C's P/E

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Qatar Insurance Company Q.S.P.C'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.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Qatar Insurance Company Q.S.P.C with six simple checks.

You might be able to find a better investment than Qatar Insurance Company Q.S.P.C. 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.