When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 18x, you may consider Hayward Holdings, Inc. (NYSE:HAYW) as a stock to avoid entirely with its 32.3x 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.

Recent times have been advantageous for Hayward Holdings as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Hayward Holdings

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

How Is Hayward Holdings' Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Hayward Holdings' to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 43% last year. The latest three year period has also seen an excellent 37% 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.

Looking ahead now, EPS is anticipated to climb by 23% per annum during the coming three years according to the ten analysts following the company. With the market only predicted to deliver 11% per annum, the company is positioned for a stronger earnings result.

With this information, we can see why Hayward Holdings is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

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.

We've established that Hayward Holdings 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.

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

You might be able to find a better investment than Hayward Holdings. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.