GQG Partners Inc.'s (ASX:GQG) Shares Lagging The Market But So Is The Business

When close to half the companies in Australia have price-to-earnings ratios (or "P/E's") above 18x, you may consider GQG Partners Inc. (ASX:GQG) as an attractive investment with its 9.2x 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.

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GQG Partners certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for GQG Partners

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

In order to justify its P/E ratio, GQG Partners would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 53% last year. Pleasingly, EPS has also lifted 800% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 9.0% each year over the next three years. Meanwhile, the rest of the market is forecast to expand by 15% each year, which is noticeably more attractive.

With this information, we can see why GQG Partners is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From GQG Partners' 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 GQG Partners' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware GQG Partners is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on GQG Partners, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.