In a situation where nearly half of U.S. companies have a price-to-earnings ratio (“P/E”) of less than 19 times, the company with a P/E ratio of 64.7 times Intuit Inc.You might consider (NASDAQ:INTU) a stock to avoid entirely. However, there may be a reason why the P/E is quite high, and further investigation is needed to determine if that reason is justified.
Intuit has been doing relatively well lately, with earnings growth outperforming most other companies. The P/E may be high because investors think this strong performance will continue. If not, existing shareholders may be a bit nervous about the viability of the share price.
Check out our latest analysis for Intuit.
November 10, 2024 NASDAQGS:INTU P/E Ratio vs. Industry November 10, 2024 Want a complete picture of analyst estimates for this company? Then about Intuitfree The report provides insight into future prospects.
Will growth be matched by high price-to-earnings ratios?
There is an inherent assumption that a company must significantly outperform the market for a price-to-earnings ratio like Intuit’s to be considered reasonable.
Looking back, last year saw the company’s profits rise an exceptional 25%. We’re pleased to say that growth over the last 12 months has seen earnings per share up a total of 38% compared to three years ago. So, we can say that the recent revenue growth has been very good for the company.
Turning to the future, estimates from analysts covering the company predict that earnings will grow at a CAGR of 19% over the next three years. With the market expected to grow at just 10% per year, the company is positioned to achieve even higher performance.
Considering this, it’s understandable that Intuit’s price-to-earnings ratio is higher than most other companies. Shareholders don’t seem to want to burden a company that is looking at a potentially more prosperous future.
What can we learn from Intuit’s P/E?
The power of the price-to-earnings ratio lies primarily in gauging current investor sentiment and future expectations rather than as a valuation tool.
As expected, Intuit’s expected growth rate is expected to be higher than the overall market, so we see that it is maintaining a high price-to-earnings ratio. At this stage, investors don’t think the potential for earnings deterioration is large enough to justify a low P/E ratio. As long as these conditions do not change, stock prices will continue to provide strong support.
It is necessary to consider the ever-present specter of investment risk. From Intuit confirmed There is 1 warning sign:understanding this should be part of your investment process.
of course You might find a better stock than Intuit. Therefore, other companies with reasonable price-to-earnings ratios and significant growth in earnings free Please see the collection.
Valuation is complex, but we want to simplify it.
Fair value estimates, potential risks, dividends, insider trading and financial condition. Find out whether Intuit is undervalued or overvalued with our detailed analysis, including:
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This article on Simply Wall St is of a general nature. We provide commentary based on historical data and analyst forecasts using unbiased methodologies and are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take into account your objectives, or your financial situation. We aim to provide long-term analysis based on fundamental data. Our analysis may not take into account the latest price-sensitive company announcements or qualitative data. Simply Wall St has no position in any of the stocks mentioned.
