Corteva, Inc.'s (NYSE:CTVA) price-to-earnings (or "P/E") ratio of 48.5x might make it look like a strong sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 17x and even P/E's below 10x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Corteva could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. 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.

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Is There Enough Growth For Corteva?

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

Retrospectively, the last year delivered a frustrating 6.4% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 50% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 41% per annum during the coming three years according to the analysts following the company. With the market only predicted to deliver 11% each year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Corteva's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Corteva'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.

We've established that Corteva maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Corteva that you should be aware of.

You might be able to find a better investment than Corteva. 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).

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