U.S. markets closed
  • S&P Futures

    4,292.25
    -6.00 (-0.14%)
     
  • Dow Futures

    33,838.00
    -35.00 (-0.10%)
     
  • Nasdaq Futures

    13,662.25
    -19.00 (-0.14%)
     
  • Russell 2000 Futures

    2,021.10
    -2.70 (-0.13%)
     
  • Crude Oil

    88.73
    -0.68 (-0.76%)
     
  • Gold

    1,794.90
    -3.20 (-0.18%)
     
  • Silver

    20.16
    -0.12 (-0.58%)
     
  • EUR/USD

    1.0157
    -0.0007 (-0.07%)
     
  • 10-Yr Bond

    2.7910
    -0.0580 (-2.04%)
     
  • Vix

    19.95
    +0.42 (+2.15%)
     
  • GBP/USD

    1.2046
    -0.0012 (-0.10%)
     
  • USD/JPY

    133.3530
    +0.0810 (+0.06%)
     
  • BTC-USD

    24,179.15
    -359.52 (-1.47%)
     
  • CMC Crypto 200

    574.75
    -16.01 (-2.71%)
     
  • FTSE 100

    7,509.15
    +8.26 (+0.11%)
     
  • Nikkei 225

    28,856.58
    -15.20 (-0.05%)
     

Focus Financial Partners Inc.'s (NASDAQ:FOCS) Earnings Haven't Escaped The Attention Of Investors

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

With a price-to-earnings (or "P/E") ratio of 59.3x Focus Financial Partners Inc. (NASDAQ:FOCS) may be sending very bearish signals at the moment, given that almost half of all companies in the United States have P/E ratios under 14x and even P/E's lower than 8x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Focus Financial Partners has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Focus Financial Partners

pe
pe

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Focus Financial Partners.

How Is Focus Financial Partners' Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Focus Financial Partners' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 309% gain to the company's bottom line. The latest three year period has also seen an excellent 229% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 22% per year as estimated by the nine analysts watching the company. That's shaping up to be materially higher than the 11% per annum growth forecast for the broader market.

With this information, we can see why Focus Financial Partners is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Focus Financial Partners' P/E?

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 Focus Financial Partners 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 2 warning signs for Focus Financial Partners (1 is concerning!) that we have uncovered.

If these risks are making you reconsider your opinion on Focus Financial Partners, 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