Investors Holding Back On Almondz Global Securities Limited (NSE:ALMONDZ)

With a price-to-earnings (or "P/E") ratio of 8.3x Almondz Global Securities Limited (NSE:ALMONDZ) may be sending bullish signals at the moment, given that almost half of all companies in India have P/E ratios greater than 16x and even P/E's higher than 40x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

As an illustration, earnings have deteriorated at Almondz Global Securities over the last year, which is not ideal at all. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for Almondz Global Securities

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

How Is Almondz Global Securities' Growth Trending?

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

Retrospectively, the last year delivered a frustrating 48% 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 1,253% 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.

This is in contrast to the rest of the market, which is expected to grow by 9.8% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Almondz Global Securities' P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

The price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Almondz Global Securities currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You need to take note of risks, for example - Almondz Global Securities has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Of course, you might also be able to find a better stock than Almondz Global Securities. So you may wish to see this free collection of other companies that sit on P/E's below 20x and have grown earnings strongly.

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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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