With a price-to-earnings (or "P/E") ratio of 14.7x Atlas Energy Solutions Inc. (NYSE:AESI) may be sending bullish signals at the moment, given that almost half of all companies in the United States have P/E ratios greater than 18x and even P/E's higher than 32x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Atlas Energy Solutions has been struggling lately as its earnings have declined faster than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Atlas Energy Solutions would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 32% decrease to the company's bottom line. Even so, admirably EPS has lifted 110,073% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 27% per annum during the coming three years according to the nine analysts following the company. With the market only predicted to deliver 11% per annum, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Atlas Energy Solutions' P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Atlas Energy Solutions' P/E?

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Atlas Energy Solutions currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. 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.

It is also worth noting that we have found 4 warning signs for Atlas Energy Solutions (1 is significant!) that you need to take into consideration.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.