Subdued Growth No Barrier To CTS Eventim AG & Co. KGaA's (ETR:EVD) Price

When close to half the companies in Germany have price-to-earnings ratios (or "P/E's") below 17x, you may consider CTS Eventim AG & Co. KGaA (ETR:EVD) as a stock to potentially avoid with its 26x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

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With earnings growth that's superior to most other companies of late, CTS Eventim KGaA has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for CTS Eventim KGaA

If you'd like to see what analysts are forecasting going forward, you should check out our free report on CTS Eventim KGaA.

Is There Enough Growth For CTS Eventim KGaA?

CTS Eventim KGaA's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

If we review the last year of earnings growth, the company posted a worthy increase of 14%. Pleasingly, EPS has also lifted 53% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the ten analysts covering the company suggest earnings should grow by 14% per year over the next three years. With the market predicted to deliver 17% growth each year, the company is positioned for a weaker earnings result.

In light of this, it's alarming that CTS Eventim KGaA's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Bottom Line On CTS Eventim KGaA's 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.

We've established that CTS Eventim KGaA currently trades on a much higher than expected P/E since its forecast growth is lower than the wider market. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

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

You might be able to find a better investment than CTS Eventim KGaA. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.