Cushman & Wakefield plc (NYSE:CWK) Might Not Be As Mispriced As It Looks
Cushman & Wakefield plc's (NYSE:CWK) price-to-earnings (or "P/E") ratio of 8.1x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 15x and even P/E's above 29x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.
Recent times have been advantageous for Cushman & Wakefield as its earnings have been rising faster 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 Cushman & Wakefield
Keen to find out how analysts think Cushman & Wakefield's future stacks up against the industry? In that case, our free report is a great place to start.
How Is Cushman & Wakefield's Growth Trending?
In order to justify its P/E ratio, Cushman & Wakefield 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 302% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.
Turning to the outlook, the next three years should generate growth of 19% per annum as estimated by the six analysts watching the company. That's shaping up to be materially higher than the 9.0% per annum growth forecast for the broader market.
With this information, we find it odd that Cushman & Wakefield is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
The Bottom Line On Cushman & Wakefield's P/E
Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've established that Cushman & Wakefield currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.
And what about other risks? Every company has them, and we've spotted 2 warning signs for Cushman & Wakefield (of which 1 is concerning!) you should know about.
If these risks are making you reconsider your opinion on Cushman & Wakefield, 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.
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