Broadridge Financial Solutions, Inc. (NYSE:BR) Not Lagging Market On Growth Or Pricing

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 17x, you may consider Broadridge Financial Solutions, Inc. (NYSE:BR) as a stock to avoid entirely with its 35x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times have been pleasing for Broadridge Financial Solutions as its earnings have risen in spite of the market's earnings going into reverse. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Broadridge Financial Solutions

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

How Is Broadridge Financial Solutions' Growth Trending?

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

Taking a look back first, we see that the company managed to grow earnings per share by a handy 11% last year. The solid recent performance means it was also able to grow EPS by 26% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 15% each year during the coming three years according to the eight analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 10% per year, which is noticeably less attractive.

In light of this, it's understandable that Broadridge Financial Solutions' 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

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.

As we suspected, our examination of Broadridge Financial Solutions' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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 settle on your opinion, we've discovered 1 warning sign for Broadridge Financial Solutions that you should be aware of.

You might be able to find a better investment than Broadridge Financial Solutions. 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.