Pinning Down Cracker Barrel Old Country Store, Inc.'s (NASDAQ:CBRL) P/E Is Difficult Right Now

There wouldn't be many who think Cracker Barrel Old Country Store, Inc.'s (NASDAQ:CBRL) price-to-earnings (or "P/E") ratio of 18.3x is worth a mention when the median P/E in the United States is similar at about 17x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Cracker Barrel Old Country Store could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for Cracker Barrel Old Country Store

Keen to find out how analysts think Cracker Barrel Old Country Store's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Cracker Barrel Old Country Store's Growth Trending?

In order to justify its P/E ratio, Cracker Barrel Old Country Store would need to produce growth that's similar to the market.

Retrospectively, the last year delivered a frustrating 22% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 1.4% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 9.5% per annum during the coming three years according to the nine analysts following the company. With the market predicted to deliver 13% growth per annum, the company is positioned for a weaker earnings result.

In light of this, it's curious that Cracker Barrel Old Country Store'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 Cracker Barrel Old Country Store'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 Cracker Barrel Old Country Store'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.

It is also worth noting that we have found 2 warning signs for Cracker Barrel Old Country Store (1 shouldn't be ignored!) that you need to take into consideration.

Of course, you might also be able to find a better stock than Cracker Barrel Old Country Store. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.