Getting In Cheap On Badger Infrastructure Solutions Ltd. (TSE:BDGI) Might Be Difficult

When close to half the companies in Canada have price-to-earnings ratios (or "P/E's") below 13x, you may consider Badger Infrastructure Solutions Ltd. (TSE:BDGI) as a stock to avoid entirely with its 29.9x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Badger Infrastructure Solutions 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. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Badger Infrastructure Solutions

Want the full picture on analyst estimates for the company? Then our free report on Badger Infrastructure Solutions will help you uncover what's on the horizon.

How Is Badger Infrastructure Solutions' Growth Trending?

Badger Infrastructure Solutions' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 128%. The strong recent performance means it was also able to grow EPS by 117% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 50% during the coming year according to the nine analysts following the company. With the market only predicted to deliver 22%, the company is positioned for a stronger earnings result.

With this information, we can see why Badger Infrastructure Solutions is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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.

As we suspected, our examination of Badger Infrastructure Solutions' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Badger Infrastructure Solutions you should know about.

You might be able to find a better investment than Badger Infrastructure Solutions. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.