U.S. Markets close in 1 hr 58 mins

Here’s What World Wrestling Entertainment Inc’s (NYSE:WWE) P/E Is Telling Us

This article is intended for those of you who are at the beginning of your investing journey and want to begin learning about how to value company based on its current earnings and what are the drawbacks of this method.

World Wrestling Entertainment Inc (NYSE:WWE) is currently trading at a trailing P/E of 85.4, which is higher than the industry average of 19.5. While this might not seem positive, it is important to understand the assumptions behind the P/E ratio before you make any investment decisions. In this article, I will explain what the P/E ratio is as well as what you should look out for when using it.

Check out our latest analysis for World Wrestling Entertainment

Breaking down the Price-Earnings ratio

NYSE:WWE PE PEG Gauge October 29th 18


P/E Calculation for WWE

Price-Earnings Ratio = Price per share ÷ Earnings per share

WWE Price-Earnings Ratio = $69.78 ÷ $0.817 = 85.4x

The P/E ratio itself doesn’t tell you a lot; however, it becomes very insightful when you compare it with other similar companies. We preferably want to compare the stock’s P/E ratio to the average of companies that have similar features to WWE, such as capital structure and profitability. One way of gathering a peer group is to use firms in the same industry, which is what I’ll do. Since WWE’s P/E of 85.4 is higher than its industry peers (19.5), it means that investors are paying more for each dollar of WWE’s earnings. This multiple is a median of profitable companies of 23 Entertainment companies in US including Dolphin Entertainment, Chicken Soup for the Soul Entertainment and Viacom. You could think of it like this: the market is pricing WWE as if it is a stronger company than the average of its industry group.

Assumptions to watch out for

However, you should be aware that this analysis makes certain assumptions. Firstly, that our peer group contains companies that are similar to WWE. If this isn’t the case, the difference in P/E could be due to other factors. Take, for example, the scenario where World Wrestling Entertainment Inc is growing profits more quickly than the average comparable company. In that case, the market may be correct to value it on a higher P/E ratio. Of course, it is possible that the stocks we are comparing with WWE are not fairly valued. Thus while we might conclude that it is richly valued relative to its peers, that could be explained by the peer group being undervalued.

What this means for you:


  1. Future Outlook: What are well-informed industry analysts predicting for WWE’s future growth? Take a look at our free research report of analyst consensus for WWE’s outlook.
  2. Past Track Record: Has WWE been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of WWE’s historicals for more clarity.

