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Subdued Growth No Barrier To Adtalem Global Education Inc.'s (NYSE:ATGE) Price

Simply Wall St·03/11/2025 14:47:49
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With a median price-to-earnings (or "P/E") ratio of close to 17x in the United States, you could be forgiven for feeling indifferent about Adtalem Global Education Inc.'s (NYSE:ATGE) P/E ratio of 16.3x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's exceedingly strong of late, Adtalem Global Education has been doing very well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Adtalem Global Education

pe-multiple-vs-industry
NYSE:ATGE Price to Earnings Ratio vs Industry March 11th 2025
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Adtalem Global Education's earnings, revenue and cash flow.

Is There Some Growth For Adtalem Global Education?

In order to justify its P/E ratio, Adtalem Global Education would need to produce growth that's similar to the market.

Retrospectively, the last year delivered an exceptional 89% gain to the company's bottom line. 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.

This is in contrast to the rest of the market, which is expected to grow by 14% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Adtalem Global Education is trading at a fairly similar P/E to the market. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent earnings trends is likely to weigh down the shares eventually.

The Final Word

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 Adtalem Global Education currently trades on a higher than expected P/E since its recent three-year growth is lower than the wider market forecast. When we see weak earnings with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. If recent medium-term earnings trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

You always need to take note of risks, for example - Adtalem Global Education has 1 warning sign we think you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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