Despite an already strong run, FBL Financial Group, Inc. (NYSE:FFG) shares have been powering on, with a gain of 26% in the last thirty days. But not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 20% in the last twelve months.
In spite of the firm bounce in price, FBL Financial Group may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 14.3x, since almost half of all companies in the United States have P/E ratios greater than 18x and even P/E's higher than 36x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
With earnings that are retreating more than the market's of late, FBL Financial Group has been very sluggish. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on FBL Financial Group.
Is There Any Growth For FBL Financial Group?
In order to justify its P/E ratio, FBL Financial Group would need to produce sluggish growth that's trailing the market.
Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 19%. This means it has also seen a slide in earnings over the longer-term as EPS is down 26% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.
Turning to the outlook, the next three years should generate growth of 12% per annum as estimated by the two analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 13% each year, which is not materially different.
With this information, we find it odd that FBL Financial Group is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.
The Bottom Line On FBL Financial Group's P/E
Despite FBL Financial Group's shares building up a head of steam, its P/E still lags most other companies. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
Our examination of FBL Financial Group's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.
There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for FBL Financial Group that you should be aware of.
You might be able to find a better investment than FBL Financial Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).
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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