Market Still Lacking Some Conviction On The Travelers Companies, Inc. (NYSE:TRV)

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may consider The Travelers Companies, Inc. (NYSE:TRV) as an attractive investment with its 14.7x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Travelers Companies 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.

See our latest analysis for Travelers Companies

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

Is There Any Growth For Travelers Companies?

The only time you'd be truly comfortable seeing a P/E as low as Travelers Companies' is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 68% gain to the company's bottom line. As a result, it also grew EPS by 7.3% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Turning to the outlook, the next three years should generate growth of 11% per annum as estimated by the analysts watching the company. With the market predicted to deliver 10% growth each year, the company is positioned for a comparable earnings result.

With this information, we find it odd that Travelers Companies is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Travelers Companies' P/E

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.

Our examination of Travelers Companies' analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. 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. 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 Travelers Companies with six simple checks on some of these key factors.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.