Touchstone Exploration Inc. (TSE:TXP) Not Lagging Market On Growth Or Pricing




  • In Business
  • 2022-12-03 12:30:30Z
  • By Simply Wall St.
 

Touchstone Exploration Inc.'s (TSE:TXP) price-to-earnings (or "P/E") ratio of 32.3x might make it look like a strong sell right now compared to the market in Canada, where around half of the companies have P/E ratios below 10x and even P/E's below 5x 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, Touchstone Exploration has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Touchstone Exploration

Keen to find out how analysts think Touchstone Exploration's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Growth For Touchstone Exploration?

Touchstone Exploration's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 496% last year. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 47% per year as estimated by the four analysts watching the company. With the market only predicted to deliver 5.5% each year, the company is positioned for a stronger earnings result.

With this information, we can see why Touchstone Exploration 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 Key Takeaway

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Touchstone Exploration's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Touchstone Exploration.

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

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

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.

Join A Paid User Research Session
You'll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here

COMMENTS

More Related News

Investors Continue Waiting On Sidelines For Kumpulan Fima Berhad (KLSE:KFIMA)
Investors Continue Waiting On Sidelines For Kumpulan Fima Berhad (KLSE:KFIMA)

With a price-to-earnings (or "P/E") ratio of 5.4x Kumpulan Fima Berhad ( KLSE:KFIMA ) may be sending very bullish...

Brisbane Broncos
Brisbane Broncos' (ASX:BBL) investors will be pleased with their solid 147% return over the last three years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can...

Parkway Life Real Estate Investment Trust
Parkway Life Real Estate Investment Trust's (SGX:C2PU) Stock Has Seen Strong Momentum: Does That Call For Deeper Study Of Its Financial Prospects?

Most readers would already be aware that Parkway Life Real Estate Investment Trust's (SGX:C2PU) stock increased...

Malaysian Genomics Resource Centre Berhad
Malaysian Genomics Resource Centre Berhad's (KLSE:MGRC) Financials Are Too Obscure To Link With Current Share Price Momentum: What's In Store For the Stock?

Malaysian Genomics Resource Centre Berhad's (KLSE:MGRC) stock is up by a considerable 15% over the past three months...

Are Robust Financials Driving The Recent Rally In Riverstone Holdings Limited
Are Robust Financials Driving The Recent Rally In Riverstone Holdings Limited's (SGX:AP4) Stock?

Most readers would already be aware that Riverstone Holdings' (SGX:AP4) stock increased significantly by 30% over the...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business