Treasury Wine Estates Ltd [ASX:TWE] jumped as much as 6% this morning, to $12.92 per share. The lift added as much as $570 million to TWE’s market cap.
Why did the ASX:TWE share price jump?
In an announcement this morning, TWE reaffirmed their positive outlook. Imports to China and pricing had been extremely favourable to TWE over the second half of 2017. It’s why TWE reiterated their FY17 second-half earnings guidance of around $226 million.
The company said there’s still significant opportunity for continued, sustainable growth in China. TWE plans to expand into new cities and provinces while also targeting a range of channels, including wholesale, e-commerce, on premise and convenience stores.
What’s next for Treasury Wine Estates?
You don’t need to read their earnings figures to see that TWE is a growing company. All you have to do is look at their price-to-earnings (P/E) ratio.
TWE trades on a P/E of 37-times earnings. But is this figure too high? It depends. If TWE can live up to its expected growth trajectory, then it might not be high after all. Yet, if growth falls short of lofty expectations, which is usually what tends to happens, then 37-times earnings is probably far too high.
Time will tell.
Junior Analyst, Money Morning
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