TFI International Inc. (TSE:TFII) Stocks Pounded By 26% But Not Lagging Market On Growth Or Pricing

TFI International Inc. (TSE:TFII) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 28% share price drop.

Although its price has dipped substantially, given around half the companies in Canada have price-to-earnings ratios (or "P/E's") below 15x, you may still consider TFI International as a stock to potentially avoid with its 20.3x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

TFI International hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Check out our latest analysis for TFI International

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

How Is TFI International's Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like TFI International's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 15%. The last three years don't look nice either as the company has shrunk EPS by 38% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 38% during the coming year according to the analysts following the company. With the market only predicted to deliver 19%, the company is positioned for a stronger earnings result.

With this information, we can see why TFI International 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.

What We Can Learn From TFI International's P/E?

TFI International's P/E hasn't come down all the way after its stock plunged. 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.

We've established that TFI International 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.

Before you take the next step, you should know about the 2 warning signs for TFI International that we have uncovered.

You might be able to find a better investment than TFI International. 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.