Investors Interested In Anheuser-Busch InBev SA/NV's (EBR:ABI) Earnings
Anheuser-Busch InBev SA/NV (EBR:ABI) has a P/E ratio of 16.5x, slightly above Belgium's median of 16x. Despite strong earnings growth of 21% last year and an 88% rise over three years, investors may be cautious about future performance. Analysts forecast a 13% growth in EPS over the next three years, aligning with market expectations. The current P/E reflects this outlook, suggesting limited potential for significant price movement. Investors should remain aware of risks, including one identified warning sign, while considering other investment opportunities.
There wouldn't be many who think Anheuser-Busch InBev SA/NV's (EBR:ABI) price-to-earnings (or "P/E") ratio of 16.5x is worth a mention when the median P/E in Belgium is similar at about 16x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
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Recent times have been advantageous for Anheuser-Busch InBev as its earnings have been rising faster than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. 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 not quite in favour.
View our latest analysis for Anheuser-Busch InBev
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Anheuser-Busch InBev.
Does Growth Match The P/E?
There's an inherent assumption that a company should be matching the market for P/E ratios like Anheuser-Busch InBev's to be considered reasonable.
Taking a look back first, we see that the company grew earnings per share by an impressive 21% last year. The latest three year period has also seen an excellent 88% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.
Turning to the outlook, the next three years should generate growth of 13% per year as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 11% per year, which is not materially different.
With this information, we can see why Anheuser-Busch InBev is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.
The Key Takeaway
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 Anheuser-Busch InBev maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Anheuser-Busch InBev, and understanding should be part of your investment process.
Of course, you might also be able to find a better stock than Anheuser-Busch InBev. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
