Risks To Shareholder Returns Are Elevated At These Prices For Huron Consulting Group Inc. (NASDAQ:HURN)

There wouldn't be many who think Huron Consulting Group Inc.'s (NASDAQ:HURN) price-to-earnings (or "P/E") ratio of 17.7x is worth a mention when the median P/E in the United States is similar at about 18x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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Huron Consulting Group certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for Huron Consulting Group

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

How Is Huron Consulting Group's Growth Trending?

Huron Consulting Group's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

If we review the last year of earnings growth, the company posted a terrific increase of 92%. The strong recent performance means it was also able to grow EPS by 93% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 1.0% over the next year. That's shaping up to be materially lower than the 13% growth forecast for the broader market.

With this information, we find it interesting that Huron Consulting Group is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Bottom Line On Huron Consulting Group's P/E

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.

Our examination of Huron Consulting Group'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. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

You should always think about risks. Case in point, we've spotted 1 warning sign for Huron Consulting Group you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.