When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may consider HighPeak Energy, Inc. (NASDAQ:HPK) as an attractive investment with its 13.1x 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.

Recent times haven't been advantageous for HighPeak Energy as its earnings have been falling quicker than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

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

How Is HighPeak Energy's Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like HighPeak Energy's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 50% decrease to the company's bottom line. Even so, admirably EPS has lifted 62% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 13% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 9.9% each year, which is noticeably less attractive.

With this information, we find it odd that HighPeak Energy is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From HighPeak Energy'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.

Our examination of HighPeak Energy's 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. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with HighPeak Energy (including 1 which is concerning).

Of course, you might also be able to find a better stock than HighPeak Energy. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.