Improved Earnings Required Before Nagreeka Exports Limited (NSE:NAGREEKEXP) Shares Find Their Feet

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 15x, you may consider Nagreeka Exports Limited (NSE:NAGREEKEXP) as an attractive investment with its 9.3x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

The recent earnings growth at Nagreeka Exports would have to be considered satisfactory if not spectacular. It might be that many expect the respectable earnings performance to degrade, which has repressed the P/E. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

View our latest analysis for Nagreeka Exports

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Nagreeka Exports will help you shine a light on its historical performance.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Nagreeka Exports would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings growth, the company posted a worthy increase of 4.5%. However, this wasn't enough as the latest three year period has seen an unpleasant 9.3% overall drop in EPS. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 3.5% shows it's an unpleasant look.

With this information, we are not surprised that Nagreeka Exports is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

What We Can Learn From Nagreeka Exports' 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.

As we suspected, our examination of Nagreeka Exports revealed its shrinking earnings over the medium-term are contributing to its low P/E, given the market is set to grow. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Nagreeka Exports (2 are concerning!) that we have uncovered.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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