Endurance Technologies Limited's (NSE:ENDURANCE) 27% Jump Shows Its Popularity With Investors

Endurance Technologies Limited (NSE:ENDURANCE) shares have continued their recent momentum with a 27% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 59% in the last year.

Since its price has surged higher, given close to half the companies in India have price-to-earnings ratios (or "P/E's") below 29x, you may consider Endurance Technologies as a stock to avoid entirely with its 50x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Endurance Technologies as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Endurance Technologies

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

What Are Growth Metrics Telling Us About The High P/E?

Endurance Technologies' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered an exceptional 42% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 31% 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 26% per year during the coming three years according to the twelve analysts following the company. That's shaping up to be materially higher than the 21% per annum growth forecast for the broader market.

With this information, we can see why Endurance Technologies is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Endurance Technologies' P/E?

The strong share price surge has got Endurance Technologies' P/E rushing to great heights as well. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Endurance Technologies' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Endurance Technologies you should know about.

Of course, you might also be able to find a better stock than Endurance Technologies. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.