After Leaping 26% MYR Group Inc. (NASDAQ:MYRG) Shares Are Not Flying Under The Radar

Those holding MYR Group Inc. (NASDAQ:MYRG) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 2.6% over the last year.

Since its price has surged higher, given close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 18x, you may consider MYR Group as a stock to avoid entirely with its 41.5x 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.

MYR Group has been struggling lately as its earnings have declined faster than most other companies. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

See our latest analysis for MYR Group

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

How Is MYR Group's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as MYR Group's is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 45%. As a result, earnings from three years ago have also fallen 35% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 20% during the coming year according to the five analysts following the company. With the market only predicted to deliver 15%, the company is positioned for a stronger earnings result.

With this information, we can see why MYR Group 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 MYR Group's P/E?

MYR Group's P/E is flying high just like its stock has during the last month. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that MYR Group maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

You always need to take note of risks, for example - MYR Group has 1 warning sign we think you should be aware of.

If you're unsure about the strength of MYR Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.