U.S. Markets close in 2 hrs 30 mins
  • S&P 500

    4,049.25
    +31.48 (+0.78%)
     
  • Dow 30

    33,889.40
    +172.31 (+0.51%)
     
  • Nasdaq

    11,510.22
    +116.41 (+1.02%)
     
  • Russell 2000

    1,920.54
    +34.82 (+1.85%)
     
  • Crude Oil

    78.96
    +1.06 (+1.36%)
     
  • Gold

    1,946.30
    +7.10 (+0.37%)
     
  • Silver

    23.85
    +0.12 (+0.51%)
     
  • EUR/USD

    1.0872
    +0.0015 (+0.1413%)
     
  • 10-Yr Bond

    3.5270
    -0.0240 (-0.68%)
     
  • Vix

    19.34
    -0.60 (-3.01%)
     
  • GBP/USD

    1.2329
    -0.0025 (-0.1997%)
     
  • USD/JPY

    130.1600
    -0.1980 (-0.1519%)
     
  • BTC-USD

    23,144.87
    -7.75 (-0.03%)
     
  • CMC Crypto 200

    525.55
    +6.76 (+1.30%)
     
  • FTSE 100

    7,771.70
    -13.17 (-0.17%)
     
  • Nikkei 225

    27,327.11
    -106.29 (-0.39%)
     

Earnings Tell The Story For Bowman Consulting Group Ltd. (NASDAQ:BWMN) As Its Stock Soars 25%

Bowman Consulting Group Ltd. (NASDAQ:BWMN) shareholders have had their patience rewarded with a 25% share price jump in the last month. Taking a wider view, although not as strong as the last month, the full year gain of 10% is also fairly reasonable.

Following the firm bounce in price, given close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 14x, you may consider Bowman Consulting Group as a stock to avoid entirely with its 78.7x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Bowman Consulting Group certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Bowman Consulting Group

pe
pe

Want the full picture on analyst estimates for the company? Then our free report on Bowman Consulting Group will help you uncover what's on the horizon.

What Are Growth Metrics Telling Us About The High P/E?

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

If we review the last year of earnings growth, the company posted a terrific increase of 128%. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 4.5% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 118% as estimated by the two analysts watching the company. That's shaping up to be materially higher than the 7.3% growth forecast for the broader market.

In light of this, it's understandable that Bowman Consulting Group's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Bowman Consulting Group's P/E?

Bowman Consulting Group's P/E is flying high just like its stock has during the last month. 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 Bowman Consulting Group 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Bowman Consulting Group that you should be aware of.

If these risks are making you reconsider your opinion on Bowman Consulting Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here