When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") below 17x, you may consider CACI International Inc (NYSE:CACI) as a stock to potentially avoid with its 24.6x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

CACI International certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

How Is CACI International's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as CACI International's is when the company's growth is on track to outshine the market.

Retrospectively, the last year delivered a decent 10% gain to the company's bottom line. The solid recent performance means it was also able to grow EPS by 6.6% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 13% each year during the coming three years according to the twelve analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 10% each year, which is noticeably less attractive.

With this information, we can see why CACI International is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From CACI International's P/E?

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of CACI International's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for CACI International that you should be aware of.

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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