F&G Annuities & Life, Inc.'s (NYSE:FG) Business And Shares Still Trailing The Market

F&G Annuities & Life, Inc.'s (NYSE:FG) price-to-earnings (or "P/E") ratio of 3.6x might make it look like a strong buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 16x and even P/E's above 30x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

F&G Annuities & Life could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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 F&G Annuities & Life

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

How Is F&G Annuities & Life's Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like F&G Annuities & Life's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 5.6%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 1,092% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should bring diminished returns, with earnings decreasing 42% as estimated by the twin analysts watching the company. Meanwhile, the broader market is forecast to expand by 6.4%, which paints a poor picture.

In light of this, it's understandable that F&G Annuities & Life's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On F&G Annuities & Life's P/E

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.

We've established that F&G Annuities & Life maintains its low P/E on the weakness of its forecast for sliding earnings, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 3 warning signs for F&G Annuities & Life (2 are significant!) that you should be aware of.

You might be able to find a better investment than F&G Annuities & Life. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

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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.