Some Shareholders Feeling Restless Over Dalrymple Bay Infrastructure Limited's (ASX:DBI) P/E Ratio

It's not a stretch to say that Dalrymple Bay Infrastructure Limited's (ASX:DBI) price-to-earnings (or "P/E") ratio of 18.5x right now seems quite "middle-of-the-road" compared to the market in Australia, where the median P/E ratio is around 19x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Dalrymple Bay Infrastructure 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 might be that many expect the strong earnings performance to deteriorate like the rest, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Dalrymple Bay Infrastructure

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dalrymple Bay Infrastructure.

How Is Dalrymple Bay Infrastructure's Growth Trending?

The only time you'd be comfortable seeing a P/E like Dalrymple Bay Infrastructure's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered a decent 7.2% gain to the company's bottom line. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to climb by 11% each year during the coming three years according to the four analysts following the company. With the market predicted to deliver 17% growth per year, the company is positioned for a weaker earnings result.

With this information, we find it interesting that Dalrymple Bay Infrastructure is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

The Bottom Line On Dalrymple Bay Infrastructure's P/E

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Dalrymple Bay Infrastructure currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

You should always think about risks. Case in point, we've spotted 2 warning signs for Dalrymple Bay Infrastructure you should be aware of, and 1 of them makes us a bit uncomfortable.

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.