Siebert Financial Corp. (NASDAQ:SIEB) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 71% in the last year.

Even after such a large jump in price, Siebert Financial's price-to-earnings (or "P/E") ratio of 11.5x might still make it look like a buy right now compared to the market in the United States, where around half of the companies have P/E ratios above 20x and even P/E's above 35x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

With earnings growth that's exceedingly strong of late, Siebert Financial has been doing very well. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Siebert Financial will help you shine a light on its historical performance.

How Is Siebert Financial's Growth Trending?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 61% last year. The latest three year period has also seen an excellent 51% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 15% shows it's about the same on an annualised basis.

In light of this, it's peculiar that Siebert Financial's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.

The Key Takeaway

Siebert Financial's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

Our examination of Siebert Financial revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

It is also worth noting that we have found 1 warning sign for Siebert Financial that you need to take into consideration.

If you're unsure about the strength of Siebert Financial's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.