Some Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) Shareholders Look For Exit As Shares Take 26% Pounding

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Indeed, the recent drop has reduced its annual gain to a relatively sedate 4.6% over the last twelve months.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Cracker Barrel Old Country Store's P/E ratio of 20.9x, since the median price-to-earnings (or "P/E") ratio in the United States is also close to 19x. 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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Cracker Barrel Old Country Store certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

Check out our latest analysis for Cracker Barrel Old Country Store

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

How Is Cracker Barrel Old Country Store's Growth Trending?

Cracker Barrel Old Country Store'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 12% gain to the company's bottom line. Ultimately though, it couldn't turn around the poor performance of the prior period, with EPS shrinking 63% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest earnings should grow by 7.3% each year over the next three years. With the market predicted to deliver 11% growth per year, the company is positioned for a weaker earnings result.

In light of this, it's curious that Cracker Barrel Old Country Store's P/E sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Key Takeaway

Following Cracker Barrel Old Country Store's share price tumble, its P/E is now hanging on to the median market P/E. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Cracker Barrel Old Country Store's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

It is also worth noting that we have found 3 warning signs for Cracker Barrel Old Country Store that you need to take into consideration.

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.