Investors Give Forian Inc. (NASDAQ:FORA) Shares A 28% Hiding

The Forian Inc. (NASDAQ:FORA) share price has fared very poorly over the last month, falling by a substantial 28%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 19% in that time.

Although its price has dipped substantially, Forian may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of -3.2x, since almost half of all companies in the United States have P/E ratios greater than 15x and even P/E's higher than 29x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Recent times have been advantageous for Forian as its earnings have been rising faster than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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 Forian

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

Is There Any Growth For Forian?

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

Retrospectively, the last year delivered a decent 9.8% gain to the company's bottom line. Still, EPS has barely risen at all in aggregate from three years ago, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 73% during the coming year according to the sole analyst following the company. That's shaping up to be materially higher than the 5.0% growth forecast for the broader market.

In light of this, it's peculiar that Forian's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Forian's P/E

Having almost fallen off a cliff, Forian's share price has pulled its P/E way down as well. 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 Forian currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Forian, and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on Forian, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.