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The Price Is Right For 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS)

Simply Wall St
·3 min read

With a price-to-earnings (or "P/E") ratio of 41.7x 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) 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 17x and even P/E's lower than 9x 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.

1-800-FLOWERS.COM certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for 1-800-FLOWERS.COM

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If you'd like to see what analysts are forecasting going forward, you should check out our free report on 1-800-FLOWERS.COM.

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

In order to justify its P/E ratio, 1-800-FLOWERS.COM would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 17% gain to the company's bottom line. The latest three year period has also seen an excellent 66% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the six analysts covering the company suggest earnings growth will be highly resilient over the next year growing by 27%. With the rest of the market predicted to shrink by 4.6%, that would be a fantastic result.

With this information, we can see why 1-800-FLOWERS.COM is trading at such a high P/E compared to the market. At this time, shareholders aren't keen to offload something that is potentially eyeing a much more prosperous future.

The Key Takeaway

The price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of 1-800-FLOWERS.COM's analyst forecasts revealed that its superior earnings outlook against a shaky market is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. We still remain cautious about the company's ability to keep swimming against the current of the broader market turmoil. Otherwise, it's hard to see the share price falling strongly in the near future under the current growth expectations.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with 1-800-FLOWERS.COM, and understanding should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.