Investors Still Aren't Entirely Convinced By Atlanticus Holdings Corporation's (NASDAQ:ATLC) Earnings Despite 26% Price Jump

Atlanticus Holdings Corporation (NASDAQ:ATLC) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Taking a wider view, although not as strong as the last month, the full year gain of 15% is also fairly reasonable.

Even after such a large jump in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 19x, you may still consider Atlanticus Holdings as an attractive investment with its 9.7x 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.

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With earnings growth that's superior to most other companies of late, Atlanticus Holdings has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Atlanticus Holdings

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Atlanticus Holdings.

Does Growth Match The Low P/E?

Atlanticus Holdings' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 27% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 25% drop in EPS in aggregate. 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 six analysts covering the company suggest earnings should grow by 15% over the next year. That's shaping up to be similar to the 16% growth forecast for the broader market.

In light of this, it's peculiar that Atlanticus Holdings' P/E sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Atlanticus Holdings' P/E?

Despite Atlanticus Holdings' shares building up a head of steam, its P/E still lags most other companies. 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.

We've established that Atlanticus Holdings currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

Having said that, be aware Atlanticus Holdings is showing 1 warning sign in our investment analysis, you should know about.

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.