Honeywell International Inc.'s (NASDAQ:HON) P/E Still Appears To Be Reasonable

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 19x, you may consider Honeywell International Inc. (NASDAQ:HON) as a stock to potentially avoid with its 26.2x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Honeywell International certainly has been doing a good job lately as it's been growing earnings more 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.

Check out our latest analysis for Honeywell International

Want the full picture on analyst estimates for the company? Then our free report on Honeywell International will help you uncover what's on the horizon.

How Is Honeywell International's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as Honeywell International's is when the company's growth is on track to outshine the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 7.2% last year. The solid recent performance means it was also able to grow EPS by 11% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Turning to the outlook, the next three years should generate growth of 14% each year as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 11% per year, which is noticeably less attractive.

With this information, we can see why Honeywell International is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Honeywell International's P/E

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Honeywell International maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. 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.

Before you settle on your opinion, we've discovered 1 warning sign for Honeywell International that you should be aware of.

If you're unsure about the strength of Honeywell International's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.