Investors Appear Satisfied With Gabriel India Limited's (NSE:GABRIEL) Prospects As Shares Rocket 67%

Gabriel India Limited (NSE:GABRIEL) shares have continued their recent momentum with a 67% gain in the last month alone. The last month tops off a massive increase of 117% in the last year.

After such a large jump in price, Gabriel India may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 59.5x, since almost half of all companies in India have P/E ratios under 30x and even P/E's lower than 16x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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With earnings growth that's superior to most other companies of late, Gabriel India has been doing relatively well. 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 Gabriel India

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

Is There Enough Growth For Gabriel India?

Gabriel India's 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.

Taking a look back first, we see that the company grew earnings per share by an impressive 37% last year. The latest three year period has also seen an excellent 174% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the seven analysts covering the company suggest earnings should grow by 40% per annum over the next three years. Meanwhile, the rest of the market is forecast to only expand by 22% per annum, which is noticeably less attractive.

With this information, we can see why Gabriel India 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.

The Final Word

Shares in Gabriel India have built up some good momentum lately, which has really inflated its 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.

We've established that Gabriel India maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. 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.

Before you take the next step, you should know about the 3 warning signs for Gabriel India (2 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 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.