Stock Analysis

Getting In Cheap On Cohen & Steers, Inc. (NYSE:CNS) Is Unlikely

NYSE:CNS
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With a price-to-earnings (or "P/E") ratio of 26.9x Cohen & Steers, Inc. (NYSE:CNS) may be sending very bearish signals at the moment, given that almost half of all companies in the United States have P/E ratios under 16x and even P/E's lower than 9x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With earnings that are retreating more than the market's of late, Cohen & Steers has been very sluggish. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Cohen & Steers

pe-multiple-vs-industry
NYSE:CNS Price to Earnings Ratio vs Industry December 19th 2023
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Cohen & Steers.

How Is Cohen & Steers' Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Cohen & Steers' to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 36%. Regardless, EPS has managed to lift by a handy 8.5% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 0.05% each year as estimated by the only analyst watching the company. That's shaping up to be materially lower than the 12% per year growth forecast for the broader market.

In light of this, it's alarming that Cohen & Steers' P/E sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Key Takeaway

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Cohen & Steers' analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you settle on your opinion, we've discovered 2 warning signs for Cohen & Steers that you should be aware of.

Of course, you might also be able to find a better stock than Cohen & Steers. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Valuation is complex, but we're helping make it simple.

Find out whether Cohen & Steers is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.