Market Cool On Ganges Securities Limited's (NSE:GANGESSECU) Earnings

With a price-to-earnings (or "P/E") ratio of 4.3x Ganges Securities Limited (NSE:GANGESSECU) may be sending very bullish signals at the moment, given that almost half of all companies in India have P/E ratios greater than 13x and even P/E's higher than 31x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Ganges Securities has been doing a decent job lately as it's been growing earnings at a reasonable pace. One possibility is that the P/E is low because investors think this good earnings growth might actually underperform the broader market in the near future. 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 Ganges Securities

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Ganges Securities' earnings, revenue and cash flow.

Is There Any Growth For Ganges Securities?

Ganges Securities' P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Retrospectively, the last year delivered a decent 3.7% gain to the company's bottom line. The solid recent performance means it was also able to grow EPS by 27% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

In contrast to the company, the rest of the market is expected to decline by 4.1% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

In light of this, it's quite peculiar that Ganges Securities' P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Ganges Securities' 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.

Our examination of Ganges Securities revealed its growing earnings over the medium-term aren't contributing to its P/E anywhere near as much as we would have predicted, given the market is set to shrink. We think potential risks might be placing significant pressure on the P/E ratio and share price. Perhaps there is some hesitation about the company's ability to stay its recent course and swim against the current of the broader market turmoil. It appears many are indeed anticipating earnings instability, because this relative performance should normally provide a boost to the share price.

Before you take the next step, you should know about the 3 warning signs for Ganges Securities (1 can't be ignored!) that we have uncovered.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a P/E below 20x.

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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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