A Piece Of The Puzzle Missing From YETI Holdings, Inc.'s (NYSE:YETI) Share Price

It's not a stretch to say that YETI Holdings, Inc.'s (NYSE:YETI) price-to-earnings (or "P/E") ratio of 16.1x right now seems quite "middle-of-the-road" compared to the market in the United States, where the median P/E ratio is around 18x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's superior to most other companies of late, YETI Holdings has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for YETI Holdings

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

How Is YETI Holdings' Growth Trending?

The only time you'd be comfortable seeing a P/E like YETI Holdings' is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a worthy increase of 7.1%. Still, lamentably EPS has fallen 12% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 15% per annum during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 11% each year growth forecast for the broader market.

In light of this, it's curious that YETI Holdings' P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On YETI 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.

We've established that YETI Holdings currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for YETI Holdings with six simple checks on some of these key factors.

Of course, you might also be able to find a better stock than YETI 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.