Element Fleet Management has seen its share price move sharply in recent years, and investors now have to ask whether the current TSX price is properly supported by the earnings behind the fleet services business. The question is sharper after fresh headlines around autonomous vehicles and cost cuts, which both feed directly into how sustainable Element Fleet Management's profit base might be.

• Over the past 5 years the stock has returned 76.7%, which puts the spotlight firmly on whether the earnings stream behind that gain is strong enough to support today's valuation.

• The expanded partnership with Waymo and the workforce reduction program both affect expectations for profitability and cash generation, which can change how investors weigh Element Fleet Management's earnings against its current share price.

• Your read on Element Fleet Management is one view; the desks covering it have another. See what analysts think Element Fleet Management's shares could be worth .

The issue now is whether Element Fleet Management's current share price is justified by the earnings power that investors can see today.

To see how Element Fleet Management's earnings story compares with other potential ideas in this space, you can compare it with companies in the 5 high quality undervalued stocks

Is Element Fleet Management a Bargain on Earnings?

The P/E ratio is a useful lens for Element Fleet Management because earnings are a key focus for a capital intensive fleet services group. On this measure, the stock trades on about 20.3x earnings, which is above the broader Commercial Services industry average of roughly 15.3x but below a peer group closer to 29.7x. That mix suggests the market is already paying a premium to the sector for Element Fleet Management's profit profile while still pricing it under some closer comparables.

Because the recent expansion of the Waymo partnership has sharpened interest in Element Fleet Management's earnings potential, the current P/E looks more interesting than a simple sector screen. The valuation framework that adjusts for the business's growth outlook, profitability, size and risk points to a higher multiple than where the shares trade today, which implies the stock looks undervalued on this earnings yardstick. For an investor, the key question is whether the earnings quality and cash generation that underpin that model hold up against future results and any new capital allocation decisions. Explore the numbers behind Element Fleet Management's P/E valuation .