Shareholders Should Be Pleased With Badger Infrastructure Solutions Ltd.'s (TSE:BDGI) Price

Badger Infrastructure Solutions Ltd.'s (TSE:BDGI) price-to-earnings (or "P/E") ratio of 24.5x might make it look like a strong sell right now compared to the market in Canada, where around half of the companies have P/E ratios below 14x and even P/E's below 7x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Badger Infrastructure Solutions as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. 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

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

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.

Retrospectively, the last year delivered an exceptional 55% gain to the company's bottom line. The latest three year period has also seen an excellent 957% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 55% as estimated by the seven analysts watching the company. With the market only predicted to deliver 23%, 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. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Badger Infrastructure Solutions maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Badger Infrastructure Solutions.

Of course, you might also be able to find a better stock than Badger Infrastructure Solutions. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com