Investors Continue Waiting On Sidelines For Stifel Financial Corp. (NYSE:SF)

It's not a stretch to say that Stifel Financial Corp.'s (NYSE:SF) price-to-earnings (or "P/E") ratio of 17.5x right now seems quite "middle-of-the-road" compared to the market in the United States, where the median P/E ratio is around 18x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been advantageous for Stifel Financial as its earnings have been rising faster 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 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 not quite in favour.

See our latest analysis for Stifel Financial

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

Is There Some Growth For Stifel Financial?

Stifel Financial'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.

Taking a look back first, we see that the company grew earnings per share by an impressive 27% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 11% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 18% per annum as estimated by the eight analysts watching the company. That's shaping up to be materially higher than the 11% each year growth forecast for the broader market.

With this information, we find it interesting that Stifel Financial is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

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.

Our examination of Stifel Financial's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with Stifel Financial (including 1 which is potentially serious).

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.