MSA Safety Incorporated's (NYSE:MSA) Shareholders Might Be Looking For Exit

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 19x, you may consider MSA Safety Incorporated (NYSE:MSA) as a stock to potentially avoid with its 24.8x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

MSA Safety could be doing better as it's been growing earnings less than most other companies lately. It might be that many expect the uninspiring earnings performance to recover significantly, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for MSA Safety

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MSA Safety.

Is There Enough Growth For MSA Safety?

In order to justify its P/E ratio, MSA Safety would need to produce impressive growth in excess of the market.

If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. Although pleasingly EPS has lifted 547% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 10% per annum as estimated by the six analysts watching the company. With the market predicted to deliver 11% growth per year, the company is positioned for a comparable earnings result.

In light of this, it's curious that MSA Safety's P/E sits above the majority of other companies. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. Although, additional gains will be difficult to achieve as this level of earnings growth is likely to weigh down the share price eventually.

The Bottom Line On MSA Safety'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.

Our examination of MSA Safety's analyst forecasts revealed that its market-matching earnings outlook isn't impacting its high P/E as much as we would have predicted. Right now we are uncomfortable with the relatively high share price as the predicted future earnings aren't likely to support such positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for MSA Safety that you should be aware of.

You might be able to find a better investment than MSA Safety. 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).

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.