With a price-to-earnings (or "P/E") ratio of 13.3x Raymond James Financial, Inc. (NYSE:RJF) 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 17x and even P/E's higher than 32x are not unusual.  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 superior to most other companies of late, Raymond James Financial has been doing relatively well.   It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E.  If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.    

See our latest analysis for Raymond James Financial

NYSE:RJF Price to Earnings Ratio vs Industry January 15th 2024

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

Does Growth Match The Low P/E?  

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

If we review the last year of earnings growth, the company posted a worthy increase of 14%.   The latest three year period has also seen an excellent 108% overall rise in EPS, aided somewhat by its short-term performance.  Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.  

Turning to the outlook, the next three years should generate growth of 9.5%  per year as estimated by the analysts watching the company.  That's shaping up to be materially lower than the 13% per year growth forecast for the broader market.

In light of this, it's understandable that Raymond James Financial's P/E sits below the majority of other companies.  Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.  

The Bottom Line On Raymond James Financial's 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 Raymond James Financial maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected.  At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio.  It's hard to see the share price rising strongly in the near future under these circumstances.    

We don't want to rain on the parade too much, but we did also find 2 warning signs for Raymond James Financial that you need to be mindful of.  

You might be able to find a better investment than Raymond James Financial. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.