Yahoo Finance Singapore Telecommunications Limited (SGX:Z74) Not Lagging Market On Growth Or Pricing
Singapore Telecommunications Limited's (SGX:Z74) price-to-earnings (or "P/E") ratio of 20.1x might make it look like a strong sell right now compared to the market in Singapore, where around half of the companies have P/E ratios below 10x and even P/E's below 6x are quite common. 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 advantageous for Singapore Telecommunications as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.
See our latest analysis for Singapore Telecommunications
Want the full picture on analyst estimates for the company? Then our free report on Singapore Telecommunications will help you uncover what's on the horizon.
How Is Singapore Telecommunications' Growth Trending?
In order to justify its P/E ratio, Singapore Telecommunications would need to produce outstanding growth well in excess of the market.
If we review the last year of earnings growth, the company posted a terrific increase of 107%. The strong recent performance means it was also able to grow EPS by 46% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 9.0% each year over the next three years. With the market only predicted to deliver 1.6% per year, the company is positioned for a stronger earnings result.
In light of this, it's understandable that Singapore Telecommunications' P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
What We Can Learn From Singapore Telecommunications' P/E?
Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.
As we suspected, our examination of Singapore Telecommunications' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
We don't want to rain on the parade too much, but we did also find 1 warning sign for Singapore Telecommunications that you need to be mindful of.
If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.
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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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