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It's not a stretch to say that Beasley Broadcast Group, Inc.'s (NASDAQ:BBGI) price-to-earnings (or "P/E") ratio of 17.8x right now seems quite "middle-of-the-road" compared to the market in the United States, where the median P/E ratio is around 17x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
Beasley Broadcast Group 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 strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
Where Does Beasley Broadcast Group's P/E Sit Within Its Industry?
An inspection of the typical P/E's throughout Beasley Broadcast Group's industry may help to explain its fairly average P/E ratio. The image below shows that the Media industry as a whole has a P/E ratio lower than the market. So unfortunately this doesn't provide a lot to explain the company's ratio right now. Ordinarily, the majority of companies' P/E's would be compressed by the general conditions within the Media industry. However, what is happening on the company's own income statement is the most important factor to its P/E.
Want the full picture on analyst estimates for the company? Then our free report on Beasley Broadcast Group will help you uncover what's on the horizon.
How Is Beasley Broadcast Group's Growth Trending?
There's an inherent assumption that a company should be matching the market for P/E ratios like Beasley Broadcast Group's to be considered reasonable.
Retrospectively, the last year delivered a frustrating 71% 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 94% in total over the last three years. 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 three years should generate growth of 81% per year as estimated by the one analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 10.0% per annum, which is noticeably less attractive.
In light of this, it's curious that Beasley Broadcast Group's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Key Takeaway
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.
Our examination of Beasley Broadcast Group's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.
Having said that, be aware Beasley Broadcast Group is showing 5 warning signs in our investment analysis, and 1 of those shouldn't be ignored.
It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).
This article by Simply Wall St is general in nature. 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.
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