The Tinplate Company Of India Limited's (NSE:TINPLATE) Earnings Haven't Escaped The Attention Of Investors

When close to half the companies in India have price-to-earnings ratios (or "P/E's") below 12x, you may consider The Tinplate Company Of India Limited (NSE:TINPLATE) as a stock to potentially avoid with its 15.1x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's exceedingly strong of late, Tinplate Company Of India has been doing very well. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Tinplate Company Of India

Where Does Tinplate Company Of India's P/E Sit Within Its Industry?

We'd like to see if P/E's within Tinplate Company Of India's industry might provide some colour around the company's high P/E ratio. It turns out the Metals and Mining industry in general has a P/E ratio similar to the market, as the graphic below shows. So we'd say there is little merit in the premise that the company's ratio being shaped by its industry at this time. Some industry P/E's don't move around a lot and right now most companies within the Metals and Mining industry should be getting restrained. We'd highlight though, the spotlight should be on the anticipated direction of the company's earnings.

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 Tinplate Company Of India's earnings, revenue and cash flow.

Does Growth Match The High P/E?

There's an inherent assumption that a company should outperform the market for P/E ratios like Tinplate Company Of India's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 64% last year. Pleasingly, EPS has also lifted 241% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

In contrast to the company, the rest of the market is expected to decline by 6.7% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

With this information, we can see why Tinplate Company Of India is trading at a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse. However, its current earnings trajectory will be very difficult to maintain against the headwinds other companies are facing at the moment.

What We Can Learn From Tinplate Company Of India's P/E?

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Tinplate Company Of India maintains its high P/E on the strength of its recentthree-year growth beating forecasts for a struggling market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. We still remain cautious about the company's ability to stay its recent course and swim against the current of the broader market turmoil. Although, if the company's relative performance doesn't change it will continue to provide strong support to the share price.

It is also worth noting that we have found 2 warning signs for Tinplate Company Of India that you need to take into consideration.

If these risks are making you reconsider your opinion on Tinplate Company Of India, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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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