WEBULL

Investors Still Waiting For A Pull Back In Coloplast A/S (CPH:COLO B)

Simply Wall St · 05/25 06:40

When close to half the companies in Denmark have price-to-earnings ratios (or "P/E's") below 15x, you may consider Coloplast A/S (CPH:COLO B) as a stock to avoid entirely with its 31.2x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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Coloplast hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Coloplast

pe-multiple-vs-industry
CPSE:COLO B Price to Earnings Ratio vs Industry May 25th 2025
Keen to find out how analysts think Coloplast's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Coloplast's Growth Trending?

In order to justify its P/E ratio, Coloplast would need to produce outstanding growth well in excess of the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 10%. The last three years don't look nice either as the company has shrunk EPS by 9.5% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 18% per annum during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 13% per year growth forecast for the broader market.

With this information, we can see why Coloplast 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.

What We Can Learn From Coloplast's P/E?

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Coloplast maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Coloplast (1 can't be ignored!) that you need to be mindful of.

Of course, you might also be able to find a better stock than Coloplast. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.