Some Confidence Is Lacking In Sterling Infrastructure, Inc. (NASDAQ:STRL) As Shares Slide 38%

The Sterling Infrastructure, Inc. (NASDAQ:STRL) share price has fared very poorly over the last month, falling by a substantial 38%. Still, a bad month hasn't completely ruined the past year with the stock gaining 34%, which is great even in a bull market.

Even after such a large drop in price, there still wouldn't be many who think Sterling Infrastructure's price-to-earnings (or "P/E") ratio of 19.4x is worth a mention when the median P/E in the United States is similar at about 18x. 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.

With earnings growth that's superior to most other companies of late, Sterling Infrastructure has been doing relatively well. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for Sterling Infrastructure

Want the full picture on analyst estimates for the company? Then our free report on Sterling Infrastructure will help you uncover what's on the horizon.

How Is Sterling Infrastructure's Growth Trending?

In order to justify its P/E ratio, Sterling Infrastructure would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 54%. The latest three year period has also seen an excellent 196% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 6.1% over the next year. With the market predicted to deliver 14% growth , the company is positioned for a weaker earnings result.

In light of this, it's curious that Sterling Infrastructure's P/E sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

What We Can Learn From Sterling Infrastructure's P/E?

Sterling Infrastructure's plummeting stock price has brought its P/E right back to the rest of the market. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Sterling Infrastructure's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Sterling Infrastructure that you need to be mindful of.

You might be able to find a better investment than Sterling Infrastructure. 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.