Siebert Financial Corp. (NASDAQ:SIEB) Surges 28% Yet Its Low P/E Is No Reason For Excitement

Despite an already strong run, Siebert Financial Corp. (NASDAQ:SIEB) shares have been powering on, with a gain of 28% in the last thirty days. The last 30 days bring the annual gain to a very sharp 60%.

Even after such a large jump in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 20x, you may still consider Siebert Financial as an attractive investment with its 11.3x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Siebert Financial certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. 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 Siebert Financial

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Siebert Financial's earnings, revenue and cash flow.

How Is Siebert Financial's Growth Trending?

In order to justify its P/E ratio, Siebert Financial would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 95% last year. Pleasingly, EPS has also lifted 43% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 15% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Siebert Financial is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From Siebert Financial's P/E?

The latest share price surge wasn't enough to lift Siebert Financial's P/E close to the market median. 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.

We've established that Siebert Financial maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Siebert Financial that you need to be mindful of.

If you're unsure about the strength of Siebert Financial's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.