Venture Corporation Limited's (SGX:V03) price-to-earnings (or "P/E") ratio of 14.3x might make it look like a sell right now compared to the market in Singapore, where around half of the companies have P/E ratios below 11x and even P/E's below 7x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

Venture hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Venture

SGX:V03 Price to Earnings Ratio vs Industry January 14th 2025

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

How Is Venture's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as Venture's is when the company's growth is on track to outshine the market.

Retrospectively, the last year delivered a frustrating 24% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 17% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the twelve analysts covering the company suggest earnings should grow by 5.8% per annum over the next three years. Meanwhile, the rest of the market is forecast to expand by 10% per year, which is noticeably more attractive.

In light of this, it's alarming that Venture's P/E sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Bottom Line On Venture's P/E

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.

Our examination of Venture'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. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Venture that you should be aware of.

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