Even With A 26% Surge, Cautious Investors Are Not Rewarding Heritage Insurance Holdings, Inc.'s (NYSE:HRTG) Performance Completely

Heritage Insurance Holdings, Inc. (NYSE:HRTG) shareholders have had their patience rewarded with a 26% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 37% in the last year.

In spite of the firm bounce in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 16x, you may still consider Heritage Insurance Holdings as an attractive investment with its 9.6x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Recent times have been advantageous for Heritage Insurance Holdings 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 Heritage Insurance Holdings

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

Is There Any Growth For Heritage Insurance Holdings?

In order to justify its P/E ratio, Heritage Insurance Holdings would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 16% gain to the company's bottom line. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 21% over the next year. That's shaping up to be materially higher than the 14% growth forecast for the broader market.

With this information, we find it odd that Heritage Insurance Holdings is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Heritage Insurance Holdings' P/E?

The latest share price surge wasn't enough to lift Heritage Insurance Holdings' P/E close to the market median. 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.

Our examination of Heritage Insurance Holdings' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Plus, you should also learn about this 1 warning sign we've spotted with Heritage Insurance Holdings .

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.