It's not a stretch to say that Rogers Communications Inc.'s (TSE:RCI.B) price-to-earnings (or "P/E") ratio of 16.5x right now seems quite "middle-of-the-road" compared to the market in Canada, where the median P/E ratio is around 16x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Rogers Communications hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for Rogers Communications

Keen to find out how analysts think Rogers Communications' future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The P/E?

There's an inherent assumption that a company should be matching the market for P/E ratios like Rogers Communications' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 18% 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 64% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 3.5% per annum as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 27% per year, which is noticeably more attractive.

With this information, we find it interesting that Rogers Communications is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

What We Can Learn From Rogers Communications' 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 Rogers Communications currently trades on a higher than expected P/E since its forecast growth is lower than the wider market. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

It is also worth noting that we have found 1 warning sign for Rogers Communications that you need to take into consideration.

You might be able to find a better investment than Rogers Communications. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

This article by Simply Wall St is general in nature. 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.

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