Chord Energy Corporation's (NASDAQ:CHRD) P/E Is On The Mark

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 14x, you may consider Chord Energy Corporation (NASDAQ:CHRD) as a stock to potentially avoid with its 16.7x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Chord Energy certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Chord Energy

Want the full picture on analyst estimates for the company? Then our free report on Chord Energy will help you uncover what's on the horizon.

How Is Chord Energy's Growth Trending?

In order to justify its P/E ratio, Chord Energy would need to produce impressive growth in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 449%. The strong recent performance means it was also able to grow EPS by 1,118% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 65% per year as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 9.6% per year growth forecast for the broader market.

In light of this, it's understandable that Chord Energy's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Chord Energy maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Chord Energy (of which 1 is potentially serious!) you should know about.

You might be able to find a better investment than Chord Energy. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

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

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.