W. R. Berkley Corporation's (NYSE:WRB) Business And Shares Still Trailing The Market

W. R. Berkley Corporation's (NYSE:WRB) price-to-earnings (or "P/E") ratio of 13.3x might make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 19x and even P/E's above 34x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, W. R. Berkley has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for W. R. Berkley

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

How Is W. R. Berkley's Growth Trending?

W. R. Berkley's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered an exceptional 26% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 82% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the ten analysts covering the company suggest earnings should grow by 4.7% each year over the next three years. That's shaping up to be materially lower than the 10% per annum growth forecast for the broader market.

With this information, we can see why W. R. Berkley is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On W. R. Berkley's P/E

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.

We've established that W. R. Berkley maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with W. R. Berkley.

You might be able to find a better investment than W. R. Berkley. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com