Even With A 46% Surge, Cautious Investors Are Not Rewarding Brisbane Broncos Limited's (ASX:BBL) Performance Completely

Despite an already strong run, Brisbane Broncos Limited (ASX:BBL) shares have been powering on, with a gain of 46% in the last thirty days. The last 30 days bring the annual gain to a very sharp 78%.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Brisbane Broncos' P/E ratio of 22x, since the median price-to-earnings (or "P/E") ratio in Australia is also close to 21x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Earnings have risen firmly for Brisbane Broncos recently, which is pleasing to see. It might be that many expect the respectable earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Check out our latest analysis for Brisbane Broncos

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Brisbane Broncos' earnings, revenue and cash flow.

Is There Some Growth For Brisbane Broncos?

Brisbane Broncos' P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered an exceptional 21% gain to the company's bottom line. The latest three year period has also seen an excellent 133% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 23% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's curious that Brisbane Broncos' P/E sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Its shares have lifted substantially and now Brisbane Broncos' P/E is also back up to the market median. 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 Brisbane Broncos revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Brisbane Broncos with six simple checks.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.