Investors Aren't Entirely Convinced By Barrick Mining Corporation's (TSE:ABX) Earnings

It's not a stretch to say that Barrick Mining Corporation's (TSE:ABX) price-to-earnings (or "P/E") ratio of 15.5x right now seems quite "middle-of-the-road" compared to the market in Canada, where the median P/E ratio is around 15x. 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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Barrick Mining certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to wane, 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 Barrick Mining

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

What Are Growth Metrics Telling Us About The P/E?

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

Retrospectively, the last year delivered an exceptional 62% gain to the company's bottom line. EPS has also lifted 25% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 21% per year as estimated by the analysts watching the company. That's shaping up to be materially higher than the 11% per annum growth forecast for the broader market.

With this information, we find it interesting that Barrick Mining is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Barrick Mining's P/E

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.

Our examination of Barrick Mining's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Barrick Mining that you should be aware of.

Of course, you might also be able to find a better stock than Barrick Mining. 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.