Market Cool On Janus Henderson Group plc's (NYSE:JHG) Earnings

With a price-to-earnings (or "P/E") ratio of 16.4x Janus Henderson Group plc (NYSE:JHG) may be sending bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 19x and even P/E's higher than 34x 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 limited.

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While the market has experienced earnings growth lately, Janus Henderson Group's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Janus Henderson Group

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

Is There Any Growth For Janus Henderson Group?

There's an inherent assumption that a company should underperform the market for P/E ratios like Janus Henderson Group's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 4.6%. This means it has also seen a slide in earnings over the longer-term as EPS is down 26% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

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

In light of this, it's peculiar that Janus Henderson Group's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Janus Henderson Group'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 Janus Henderson Group currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Janus Henderson Group with six simple checks will allow you to discover any risks that could be an issue.

Of course, you might also be able to find a better stock than Janus Henderson Group. 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.