Rane Holdings Limited (NSE:RANEHOLDIN) Stock Rockets 31% But Many Are Still Ignoring The Company

Despite an already strong run, Rane Holdings Limited (NSE:RANEHOLDIN) shares have been powering on, with a gain of 31% in the last thirty days. The annual gain comes to 107% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 35x, you may still consider Rane Holdings as an attractive investment with its 23.7x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Rane Holdings certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong 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 Rane Holdings

Although there are no analyst estimates available for Rane Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Rane Holdings' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Rane Holdings' is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 126% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 402% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 25% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Rane Holdings' 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 Final Word

Despite Rane Holdings' shares building up a head of steam, its P/E still lags most other companies. 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.

Our examination of Rane Holdings revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Having said that, be aware Rane Holdings is showing 5 warning signs in our investment analysis, you should know about.

You might be able to find a better investment than Rane Holdings. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.