This is what Canada Goose Holdings Inc. (PSE: GOOS) says – Simply Wall St News

This article is for people who want to improve their use of price / earnings ratios (P / E ratios). We will apply a basic P / E ratio badysis to Canada Goose Holdings Inc. (TSE: GOOS) to help you determine if the stock is worthy of further study. Canada Goose Holdings has a price / earnings ratio of 49.1, based on the last twelve months. This equates to a return of about 2.0%.

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See our latest badysis for Canada Goose Holdings

How do you calculate a P / E ratio?

the formula for P / E is:

Price / earnings ratio = Price per share ÷ Earnings per share (EPS)

Or for Canada Goose Holdings:

P / E of 49.1 = $ 64.3 CAD ÷ $ 1.31 CAD (Based on the last twelve months of December 2018.)

Is a high price-earnings ratio good?

A higher P / E ratio implies that investors pay a higher price for the power to win the business. All other things being equal, it's best to pay a small price – but as Warren Buffett said, "It's far better to buy a great company at a fair price than to be a fair-trade company. exceptional price ".

How growth rates affect P / E ratios

In general, the earnings growth rate has a profound impact on a company's P / E multiple. As incomes rise, the "E" increases over time. This means that even if the current P / E is high, it will decrease over time if the stock price remains stable. A lower P / E should indicate that the stock is inexpensive relative to others – and that this can attract buyers.

Over the past year, Canada Goose Holdings reported earnings per share growth comparable to that of Taylor Swift in 2010; the 114% gain was both fast and well deserved. Better still, EPS is up 70% a year over three years. We therefore absolutely expected a relatively high P / E ratio.

Does Canada Goose Holdings have a relatively high or low P / E for its industry?

The P / E ratio essentially measures a company's market expectations. As you can see below, Canada Goose Holdings has a P / E higher than the average of the luxury sector companies (17.4%).

This means that the market expects Canada Goose Holdings to outperform other companies in its industry. It is clear that the market is expecting growth, but it is not guaranteed. It is therefore essential to continue research. I often watch purchasing and selling director.

Do not forget: the P / E ratios do not take into account the balance sheet

One of the disadvantages of using a P / E ratio is that it takes into account market capitalization, but not the balance sheet. This will not reflect the benefit of cash or the disadvantage of debt. In theory, a company could reduce its future P / E ratio by spending its cash (or indebting it) for higher profits.

Growth spending could be good or bad a few years later, but the fact is that the P / E ratio does not take into account the option (or lack thereof).

Does the debt have an impact on the P / E of Canada Goose Holdings?

Canada Goose Holdings' net debt represents 0.6% of its market capitalization. The P / E ratio would probably be higher if it had a lot of cash, but I doubt it will have a significant impact.

Canada Goose Holdings C / B Ratio Verdict

Canada Goose Holdings has a P / E of 49.1. This is well above the average of the CA market, which is 14.8. Although the company uses modest debts, the recent growth of its profits is superb. So, to be honest, we are not surprised that it has a high P / E ratio.

Investors have an opportunity when market expectations of an action are wrong. If the reality of a business is better than expected, you can make money by buying and retaining long-term badets. So that free visualizing badysts' consensus on future earnings could help you make the good choice whether to buy, sell or keep.

But note: Canada Goose Holdings may not be the best stock to buy. So take a look at this free list of interesting companies with strong earnings growth recently (and a P / E ratio below 20).

Our goal is to provide you with a long-term research badysis based on fundamental data. Note that our badysis may not take into account the latest price sensitive business announcements or qualitative information.

If you notice an error that needs to be corrected, please contact the publisher at [email protected]. This article from Simply Wall St is of a general nature. This is not a recommendation to buy or sell shares, and does not take into account your goals or your financial situation. Simply Wall St has no position on the actions mentioned. Thanks for the reading.