BellRing Brands, Inc. (NYSE:BRBR) Shares Slammed 32% But Getting In Cheap Might Be Difficult Regardless

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

BellRing Brands, Inc. (NYSE:BRBR) shareholders that were waiting for something to happen have been dealt a blow with a 32% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 28% share price drop.

Although its price has dipped substantially, given around half the companies in the United States have price-to-earnings ratios (or "P/E's") below 18x, you may still consider BellRing Brands as a stock to potentially avoid with its 21.5x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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Recent times haven't been advantageous for BellRing Brands as its earnings have been rising slower than most other companies. It might be that many expect the uninspiring earnings performance to recover significantly, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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How Is BellRing Brands' Growth Trending?

BellRing Brands' P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Retrospectively, the last year delivered a decent 5.5% gain to the company's bottom line. Pleasingly, EPS has also lifted 116% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 14% per annum over the next three years. Meanwhile, the rest of the market is forecast to only expand by 11% per annum, which is noticeably less attractive.

In light of this, it's understandable that BellRing Brands' P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

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

There's still some solid strength behind BellRing Brands' P/E, if not its share price lately. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of BellRing Brands' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with BellRing Brands.

If these risks are making you reconsider your opinion on BellRing Brands, 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.