There's No Escaping Bisalloy Steel Group Limited's (ASX:BIS) Muted Earnings Despite A 30% Share Price Rise

Despite an already strong run, Bisalloy Steel Group Limited (ASX:BIS) shares have been powering on, with a gain of 30% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 54% in the last year.

Although its price has surged higher, Bisalloy Steel Group may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 13.7x, since almost half of all companies in Australia have P/E ratios greater than 21x and even P/E's higher than 38x 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.

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With earnings growth that's superior to most other companies of late, Bisalloy Steel Group has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Bisalloy Steel Group

Keen to find out how analysts think Bisalloy Steel Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Bisalloy Steel Group's Growth Trending?

In order to justify its P/E ratio, Bisalloy Steel Group would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 24% gain to the company's bottom line. As a result, it also grew EPS by 27% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 0.2% each year during the coming three years according to the sole analyst following the company. With the market predicted to deliver 17% growth per annum, the company is positioned for a weaker earnings result.

With this information, we can see why Bisalloy Steel Group is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Bisalloy Steel Group's P/E

Despite Bisalloy Steel Group's shares building up a head of steam, its P/E still lags most other companies. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Bisalloy Steel Group's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 1 warning sign for Bisalloy Steel Group that we have uncovered.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.