Some Shareholders Feeling Restless Over Curtiss-Wright Corporation's (NYSE:CW) P/E Ratio

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 17x, you may consider Curtiss-Wright Corporation (NYSE:CW) as a stock to avoid entirely with its 29.5x 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.

Curtiss-Wright certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Curtiss-Wright

Keen to find out how analysts think Curtiss-Wright's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Growth For Curtiss-Wright?

In order to justify its P/E ratio, Curtiss-Wright would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 23% gain to the company's bottom line. The latest three year period has also seen an excellent 76% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest earnings should grow by 7.5% per year over the next three years. That's shaping up to be materially lower than the 10% each year growth forecast for the broader market.

In light of this, it's alarming that Curtiss-Wright's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of earnings growth is likely to weigh heavily on the share price eventually.

The Bottom Line On Curtiss-Wright's P/E

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Curtiss-Wright currently trades on a much higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

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 Curtiss-Wright with six simple checks.

Of course, you might also be able to find a better stock than Curtiss-Wright. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.