DTE Energy Company's (NYSE:DTE) P/E Still Appears To Be Reasonable

There wouldn't be many who think DTE Energy Company's (NYSE:DTE) price-to-earnings (or "P/E") ratio of 18.6x is worth a mention when the median P/E in the United States is similar at about 17x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been pleasing for DTE Energy as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for DTE Energy

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

What Are Growth Metrics Telling Us About The P/E?

In order to justify its P/E ratio, DTE Energy would need to produce growth that's similar to the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 7.4% last year. The latest three year period has also seen a 15% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Shifting to the future, estimates from the eleven analysts covering the company suggest earnings should grow by 8.8% per annum over the next three years. With the market predicted to deliver 10.0% growth per year, the company is positioned for a comparable earnings result.

In light of this, it's understandable that DTE Energy's P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

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 DTE Energy's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

There are also other vital risk factors to consider and we've discovered 3 warning signs for DTE Energy (1 is concerning!) that you should be aware of before investing here.

Of course, you might also be able to find a better stock than DTE Energy. 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.