WNS (Holdings) Limited's (NYSE:WNS) Price In Tune With Earnings

It's not a stretch to say that WNS (Holdings) Limited's (NYSE:WNS) price-to-earnings (or "P/E") ratio of 16.9x right now seems quite "middle-of-the-road" compared to the market in the United States, where the median P/E ratio is around 17x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

WNS (Holdings) 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. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for WNS (Holdings)

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

How Is WNS (Holdings)'s Growth Trending?

In order to justify its P/E ratio, WNS (Holdings) would need to produce growth that's similar to the market.

Retrospectively, the last year delivered a decent 4.3% gain to the company's bottom line. This was backed up an excellent period prior to see EPS up by 49% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 11% per year as estimated by the ten analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 10% per year, which is not materially different.

In light of this, it's understandable that WNS (Holdings)'s P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of WNS (Holdings)'s analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

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 WNS (Holdings) with six simple checks.

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

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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.

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