Subdued Growth No Barrier To Liberty Broadband Corporation (NASDAQ:LBRD.K) With Shares Advancing 29%

The Liberty Broadband Corporation (NASDAQ:LBRD.K) share price has done very well over the last month, posting an excellent gain of 29%. The last 30 days bring the annual gain to a very sharp 90%.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Liberty Broadband's P/E ratio of 16.2x, since the median price-to-earnings (or "P/E") ratio in the United States is also close to 18x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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The recent earnings growth at Liberty Broadband would have to be considered satisfactory if not spectacular. It might be that many expect the respectable earnings performance to only match most other companies over the coming period, which has kept the P/E from rising. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

See our latest analysis for Liberty Broadband

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 Liberty Broadband's earnings, revenue and cash flow.

How Is Liberty Broadband's Growth Trending?

Liberty Broadband's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered a decent 5.8% gain to the company's bottom line. The solid recent performance means it was also able to grow EPS by 14% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 13% shows it's noticeably less attractive on an annualised basis.

With this information, we find it interesting that Liberty Broadband is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent earnings trends is likely to weigh down the shares eventually.

What We Can Learn From Liberty Broadband's P/E?

Its shares have lifted substantially and now Liberty Broadband's P/E is also back up to the market median. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Liberty Broadband currently trades on a higher than expected P/E since its recent three-year growth is lower than the wider market forecast. Right now we are uncomfortable with the P/E as this earnings performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Liberty Broadband with six simple checks will allow you to discover any risks that could be an issue.

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.