Despite an already strong run, Saia, Inc. (NASDAQ:SAIA) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 102% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, Saia may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 41.8x, since almost half of all companies in the United States have P/E ratios under 16x and even P/E's lower than 9x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

Saia has been doing a reasonable job lately as its earnings haven't declined as much as most other companies. The P/E is probably high because investors think this comparatively better earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price, especially if earnings continue to dissolve.

What Are Growth Metrics Telling Us About The High P/E?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Saia's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 1.1% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 153% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 17% each year as estimated by the analysts watching the company. That's shaping up to be materially higher than the 10% each year growth forecast for the broader market.

In light of this, it's understandable that Saia's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Saia's P/E?

Shares in Saia have built up some good momentum lately, which has really inflated its P/E. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Saia maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. 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 1 warning sign for Saia that you should be aware of.

Of course, you might also be able to find a better stock than Saia. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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