Bloomin' Brands, Inc.'s (NASDAQ:BLMN) Earnings Are Not Doing Enough For Some Investors

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 17x, you may consider Bloomin' Brands, Inc. (NASDAQ:BLMN) as an attractive investment with its 8.6x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Bloomin' Brands certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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 out of favour.

Check out our latest analysis for Bloomin' Brands

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

Is There Any Growth For Bloomin' Brands?

The only time you'd be truly comfortable seeing a P/E as low as Bloomin' Brands' is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a terrific increase of 153%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the twelve analysts covering the company suggest earnings should grow by 0.08% per year over the next three years. That's shaping up to be materially lower than the 12% per year growth forecast for the broader market.

In light of this, it's understandable that Bloomin' Brands' P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

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.

As we suspected, our examination of Bloomin' Brands' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Bloomin' Brands (1 is potentially serious!) that you need to be mindful of.

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.