The Price Is Right For Mortgage Advice Bureau (Holdings) plc (LON:MAB1) Even After Diving 27%

Mortgage Advice Bureau (Holdings) plc (LON:MAB1) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 15%.

In spite of the heavy fall in price, Mortgage Advice Bureau (Holdings) may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 26.9x, since almost half of all companies in the United Kingdom have P/E ratios under 16x and even P/E's lower than 9x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Mortgage Advice Bureau (Holdings) certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Mortgage Advice Bureau (Holdings)

Want the full picture on analyst estimates for the company? Then our free report on Mortgage Advice Bureau (Holdings) will help you uncover what's on the horizon.

How Is Mortgage Advice Bureau (Holdings)'s Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Mortgage Advice Bureau (Holdings)'s to be considered reasonable.

Retrospectively, the last year delivered a decent 8.1% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen an unpleasant 2.1% overall drop in EPS. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 19% each year as estimated by the two analysts watching the company. With the market only predicted to deliver 15% each year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Mortgage Advice Bureau (Holdings)'s P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

A significant share price dive has done very little to deflate Mortgage Advice Bureau (Holdings)'s very lofty 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 Mortgage Advice Bureau (Holdings) 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. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for Mortgage Advice Bureau (Holdings) that you need to take into consideration.

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.