Market Might Still Lack Some Conviction On FitLife Brands, Inc. (NASDAQ:FTLF) Even After 29% Share Price Boost

Explore FitLife Brands's Fair Values from the Community and select yours

FitLife Brands, Inc. (NASDAQ:FTLF) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 4.9% isn't as impressive.

Although its price has surged higher, you could still be forgiven for feeling indifferent about FitLife Brands' P/E ratio of 17.8x, since the median price-to-earnings (or "P/E") ratio in the United States is also close to 19x. 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.

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FitLife Brands has been doing a good job lately as it's been growing earnings at a solid pace. It might be that many expect the respectable earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

View our latest analysis for FitLife Brands

Although there are no analyst estimates available for FitLife Brands, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is FitLife Brands' Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like FitLife Brands' to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 19% last year. The strong recent performance means it was also able to grow EPS by 59% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 14% shows it's noticeably more attractive on an annualised basis.

With this information, we find it interesting that FitLife Brands is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From FitLife Brands' P/E?

Its shares have lifted substantially and now FitLife Brands' P/E is also back up to the market median. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of FitLife Brands revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for FitLife Brands with six simple checks on some of these key factors.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.