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Subdued Growth No Barrier To Partners Group Holding AG (VTX:PGHN) With Shares Advancing 33%

Partners Group Holding AG (VTX:PGHN) shares have had a really impressive month, gaining 33% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 36% over that time.

Following the firm bounce in price, given close to half the companies in Switzerland have price-to-earnings ratios (or "P/E's") below 17x, you may consider Partners Group Holding as a stock to potentially avoid with its 21.1x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's lofty.

Partners Group Holding certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for Partners Group Holding

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If you'd like to see what analysts are forecasting going forward, you should check out our free report on Partners Group Holding.

What Are Growth Metrics Telling Us About The High P/E?

In order to justify its P/E ratio, Partners Group Holding would need to produce impressive growth in excess of the market.

Retrospectively, the last year delivered an exceptional 16% gain to the company's bottom line. The latest three year period has also seen an excellent 72% 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 5.7% per annum as estimated by the analysts watching the company. That's shaping up to be materially lower than the 10% per year growth forecast for the broader market.

In light of this, it's alarming that Partners Group Holding's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of earnings growth is likely to weigh heavily on the share price eventually.

What We Can Learn From Partners Group Holding's P/E?

The large bounce in Partners Group Holding's shares has lifted the company's P/E to a fairly high level. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Partners Group Holding's analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Having said that, be aware Partners Group Holding is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Partners Group Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.

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