Investors Still Waiting For A Pull Back In SS&C Technologies Holdings, Inc. (NASDAQ:SSNC)

SS&C Technologies Holdings, Inc.'s (NASDAQ:SSNC) price-to-earnings (or "P/E") ratio of 28.4x might make it look like a strong sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 18x and even P/E's below 11x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

SS&C Technologies Holdings 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. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for SS&C Technologies Holdings

If you'd like to see what analysts are forecasting going forward, you should check out our free report on SS&C Technologies Holdings.

How Is SS&C Technologies Holdings' Growth Trending?

In order to justify its P/E ratio, SS&C Technologies Holdings would need to produce outstanding growth well in excess of the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 15% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 2.1% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the eleven analysts covering the company suggest earnings should grow by 15% per annum over the next three years. Meanwhile, the rest of the market is forecast to only expand by 11% each year, which is noticeably less attractive.

In light of this, it's understandable that SS&C Technologies Holdings' 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 SS&C Technologies Holdings' P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of SS&C Technologies Holdings' 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for SS&C Technologies Holdings you should be aware of.

Of course, you might also be able to find a better stock than SS&C Technologies Holdings. 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.