With a price-to-earnings (or "P/E") ratio of 25x Bloomin' Brands, Inc. (NASDAQ:BLMN) may be sending bearish signals at the moment, given that almost half of all companies in the United States have P/E ratios under 17x and even P/E's lower than 9x are not unusual.  Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.  

With earnings that are retreating more than the market's of late, Bloomin' Brands has been very sluggish.   It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing.  You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.    

NasdaqGS:BLMN Price to Earnings Ratio vs Industry May 27th 2024

Want the full picture on analyst estimates for the company? Then our free report on Bloomin' Brands will help you uncover what's on the horizon.  

Does Growth Match The High P/E?  

Bloomin' Brands' P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.  

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 41%.   Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time.  So it appears to us that the company has had a mixed result in terms of growing earnings over that time.  

Looking ahead now, EPS is anticipated to climb by 54% each year during the coming three years according to the eleven analysts following the company.  Meanwhile, the rest of the market is forecast to only expand by 10.0% per annum, which is noticeably less attractive.

With this information, we can see why Bloomin' Brands is trading at such a high P/E compared to the market.  It seems most investors are expecting this strong future growth and are willing to pay more for the stock.  

The Bottom Line On Bloomin' Brands' P/E

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Bloomin' Brands maintains its high P/E on the strength of its forecast growth being higher than the wider market, 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.  It's hard to see the share price falling strongly in the near future under these circumstances.    

We don't want to rain on the parade too much, but we did also find 4 warning signs for Bloomin' Brands (1 is significant!) that you need to be mindful of.  

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.