CBRE Group, Inc. (NYSE:CBRE) Stocks Shoot Up 26% But Its P/E Still Looks Reasonable

CBRE Group, Inc. (NYSE:CBRE) shareholders have had their patience rewarded with a 26% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 35%.

Following the firm bounce in price, CBRE Group may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 36.5x, since almost half of all companies in the United States have P/E ratios under 18x and even P/E's lower than 10x 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.

Recent times have been pleasing for CBRE Group as its earnings have risen in spite of the market's earnings going into reverse. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for CBRE Group

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

Does Growth Match The High P/E?

In order to justify its P/E ratio, CBRE Group would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a decent 12% gain to the company's bottom line. Still, lamentably EPS has fallen 15% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest earnings should grow by 31% per annum over the next three years. With the market only predicted to deliver 10% per year, the company is positioned for a stronger earnings result.

With this information, we can see why CBRE Group is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Shares in CBRE Group have built up some good momentum lately, which has really inflated its P/E. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of CBRE Group's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for CBRE Group that you should be aware of.

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.

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