Insufficient Growth At Travel + Leisure Co. (NYSE:TNL) Hampers Share Price

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may consider Travel + Leisure Co. (NYSE:TNL) as an attractive investment with its 8.9x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Travel + Leisure has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Travel + Leisure

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

How Is Travel + Leisure's Growth Trending?

Travel + Leisure's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 23% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 5.8% during the coming year according to the nine analysts following the company. With the market predicted to deliver 11% growth , the company is positioned for a weaker earnings result.

In light of this, it's understandable that Travel + Leisure's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Travel + Leisure's 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 Travel + Leisure maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 3 warning signs for Travel + Leisure you should be aware of, and 1 of them is significant.

Of course, you might also be able to find a better stock than Travel + Leisure. 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.