Sea World Entertainment’s (NYSE: SEAS ) at 11.9 times earnings (or “P/E”), it looks like a buy right now compared to the U.S. market, where roughly half of all companies have a P/E ratio More than 15 times or even more than 30 times are not uncommon. Still, we’ll need to dig a little deeper to see if there’s a reasonable basis for a lower P/E.
SeaWorld Entertainment has really done well lately, as its earnings have grown faster than most other companies. One possibility is that the price-to-earnings ratio is low, as investors think this strong earnings performance may become less impressive going forward. If you like the company, you’ll wish that wasn’t the case so you can potentially pick up some shares when it falls out of favor.
Check out our latest analysis for SeaWorld Entertainment
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What Do Growth Indicators Tell Us About Low P/E Ratio?
There is an inherent assumption that a company should underperform the market because a P/E ratio like SeaWorld Entertainment’s is considered reasonable.
To recap first, we see that the company grew EPS by an impressive 143% last year. On a good note, earnings per share are also up 293% from three years ago combined, thanks to growth over the past 12 months. Therefore, it can be said that the company’s recent earnings growth has been stellar.
Looking ahead, earnings per share are expected to rise 8.4% in the coming year, according to nine analysts who follow the company. The company is on track for comparable earnings results as the market is expected to post growth of 7.3%.
Given this, it’s odd that SeaWorld Entertainment trades at a lower P/E than most other companies. Probably most investors do not believe that the company will be able to achieve its future growth expectations.
The Bottom Line on SeaWorld Entertainment’s P/E Ratio
We would say that the power of the P/E ratio is primarily not as a valuation tool, but as a gauge of current investor sentiment and the power of future expectations.
We’ve determined that SeaWorld Entertainment currently trades at a lower-than-expected P/E ratio, as its forecast growth is in line with the broader market. There may be some unobserved earnings threat preventing the P/E from matching the outlook. At least the risk of lower prices seems to have subsided, but investors seem to think some volatility in future earnings is possible.
Having said that, please note SeaWorld Entertainment displays 1 warning sign Here’s what you should find out in our investment analysis.
certainly, You might find a great investment by looking at some great candidates. so look at this free A list of companies with a strong growth track record that trades below 20 times earnings.
What are the risks and opportunities sea world entertainment?
Transaction price is 69.1% below our estimate of its fair value
Revenue expected to grow 17.33% annually
Revenue has grown 125% over the past year
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This article by Simply Wall St is general in nature. We use only an unbiased methodology to provide reviews based on historical data and analyst forecasts, 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 into account your objectives or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any of the stocks mentioned.