, 2023-01-18 04:22:25,
SeaWorld Entertainment, Inc. (NYSE:SEAS) price-to-earnings (or “P/E”) ratio of 11.9x could make it look like a buy right now compared to the US market, where around half of companies have higher P/E ratios to 15x and even P/Es above 30x are quite common. However, we would have to dig a little deeper to determine if there is a rational basis for the reduced P/E.
SeaWorld Entertainment has certainly been doing a good job of late, as its profits have risen more than most other companies. One possibility is that the P/E is low because investors think that this strong earnings performance could be less impressive in the future. If you like the company, I’d hope this isn’t the case so you can pick up some shares while it’s stale.
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What do growth metrics tell us about low P/E?
There is an inherent assumption that a company must underperform the market for P/E ratios like SeaWorld Entertainment’s to be considered reasonable.
Looking back first, we see that the company increased earnings per share by an impressive 143% last year. Fortunately, EPS was also up 293% in total from three years ago, thanks to the last 12 months of…
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