Interpreting whether a stock’s PE ratio is high or low depends on its earnings growth outlook and risks. Generally, rapidly expanding companies or those with stable, defensible earnings can justify higher PE ratios, while slower growth or riskier businesses tend to deserve lower multiples.

Ameresco’s current PE ratio stands at 27x. For context, the Construction industry’s average PE is 33.09x, and the average for Ameresco’s listed peers is around 24.46x. This places Ameresco at a discount to the broader industry but at a premium to its immediate peers.

Simply Wall St’s proprietary “Fair Ratio” adds another layer. It calculates the appropriate PE for Ameresco by considering not just past earnings and industry averages, but also its growth prospects, profit margins, market cap, and potential risks. This makes it more tailored and insightful than a simple peer comparison. For Ameresco, the Fair Ratio is 49.31x, which is significantly higher than its current PE ratio.

Given this large gap, the Fair Ratio suggests that Ameresco is undervalued based on its earnings potential and risk profile.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your personal investment story; you combine what you believe about a company’s future (growth rates, margins, risks or opportunities) with financial forecasts to arrive at your own fair value.

Narratives bridge the gap between numbers and real-world dynamics by letting you tie Ameresco’s unique business story directly to your assumptions, then compare your fair value against the current share price. Available right within Simply Wall St’s Community page, Narratives are easy to use, interactive, and updated automatically as new information such as earnings reports or news comes in, helping millions of investors keep their analysis current.

This means you are not just relying on generic models, but can quickly see if your view is bullish or cautious. For example, some investors believe Ameresco’s fast-growing federal contracts will justify a price above $41 per share, while others see risks and set their fair value as low as $19. With Narratives, you are empowered to act confidently on your own conviction, using up-to-date facts, your story, and a clear fair value to decide whether to buy, hold, or sell.

Do you think there’s more to the story for Ameresco? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include AMRC.

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