Positive Sentiment Still Eludes Alicon Castalloy Limited (NSE:ALICON) Following 26% Share Price Slump

Unfortunately for some shareholders, the Alicon Castalloy Limited (NSE:ALICON) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 24% in that time.

Since its price has dipped substantially, Alicon Castalloy may be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 20.3x, since almost half of all companies in India have P/E ratios greater than 25x and even P/E's higher than 48x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Alicon Castalloy could be doing better as it's been growing earnings less than most other companies lately. The P/E is probably low because investors think this lacklustre earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Alicon Castalloy

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Alicon Castalloy.

Does Growth Match The Low P/E?

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

Taking a look back first, we see that the company managed to grow earnings per share by a handy 13% last year. This was backed up an excellent period prior to see EPS up by 46% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 92% during the coming year according to the only analyst following the company. Meanwhile, the rest of the market is forecast to only expand by 25%, which is noticeably less attractive.

In light of this, it's peculiar that Alicon Castalloy's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Alicon Castalloy's P/E has taken a tumble along with its share price. 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 Alicon Castalloy currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 3 warning signs for Alicon Castalloy (1 makes us a bit uncomfortable!) that you need to take into consideration.

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 low P/E.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.