Market Participants Recognise United States Lime & Minerals, Inc.'s (NASDAQ:USLM) Earnings Pushing Shares 29% Higher

United States Lime & Minerals, Inc. (NASDAQ:USLM) shareholders have had their patience rewarded with a 29% share price jump in the last month. The last month tops off a massive increase of 145% in the last year.

Following the firm bounce in price, given close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 18x, you may consider United States Lime & Minerals as a stock to avoid entirely with its 33.7x 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 so lofty.

Recent times have been quite advantageous for United States Lime & Minerals as its earnings have been rising very briskly. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for United States Lime & Minerals

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on United States Lime & Minerals' earnings, revenue and cash flow.

How Is United States Lime & Minerals' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as United States Lime & Minerals' is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered an exceptional 36% gain to the company's bottom line. Pleasingly, EPS has also lifted 146% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

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.

In light of this, it's understandable that United States Lime & Minerals' P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From United States Lime & Minerals' P/E?

The strong share price surge has got United States Lime & Minerals' P/E rushing to great heights as well. 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 United States Lime & Minerals maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for United States Lime & Minerals you should be aware of.

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.