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eXp World Holdings, Inc.'s (NASDAQ:EXPI) Price In Tune With Earnings

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eXp World Holdings, Inc.'s (NASDAQ:EXPI) price-to-earnings (or "P/E") ratio of 79.7x might make it look like a strong sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 17x and even P/E's below 9x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, eXp World Holdings has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for eXp World Holdings

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If you'd like to see what analysts are forecasting going forward, you should check out our free report on eXp World Holdings.

Does Growth Match The High P/E?

There's an inherent assumption that a company should far outperform the market for P/E ratios like eXp World Holdings' to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 179%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 37% per annum during the coming three years according to the four analysts following the company. With the market only predicted to deliver 11% per annum, the company is positioned for a stronger earnings result.

With this information, we can see why eXp World Holdings is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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.

As we suspected, our examination of eXp World Holdings' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with eXp World Holdings, and understanding them should be part of your investment process.

If you're unsure about the strength of eXp World Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.