In This Article:
TP ICAP Group PLC (LON:TCAP) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 3.1% over the last year.
Even after such a large jump in price, TP ICAP Group's price-to-earnings (or "P/E") ratio of 14.9x might still make it look like a buy right now compared to the market in the United Kingdom, where around half of the companies have P/E ratios above 25x and even P/E's above 49x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
Recent times have been pleasing for TP ICAP Group as its earnings have risen in spite of the market's earnings going into reverse. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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.
See our latest analysis for TP ICAP Group
Keen to find out how analysts think TP ICAP Group's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Any Growth For TP ICAP Group?
The only time you'd be truly comfortable seeing a P/E as low as TP ICAP Group's is when the company's growth is on track to lag the market.
Retrospectively, the last year delivered an exceptional 44% gain to the company's bottom line. As a result, it also grew EPS by 9.3% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 18% each year during the coming three years according to the eight analysts following the company. With the market predicted to deliver 19% growth per year, the company is positioned for a comparable earnings result.
In light of this, it's peculiar that TP ICAP Group's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
The Key Takeaway
TP ICAP Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.