Investors Still Aren't Entirely Convinced By Dynamic Cables Limited's (NSE:DYCL) Earnings Despite 28% Price Jump

Dynamic Cables Limited (NSE:DYCL) shareholders have had their patience rewarded with a 28% share price jump in the last month. The last month tops off a massive increase of 200% in the last year.

In spite of the firm bounce in price, it's still not a stretch to say that Dynamic Cables' price-to-earnings (or "P/E") ratio of 33.4x right now seems quite "middle-of-the-road" compared to the market in India, where the median P/E ratio is around 32x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

The earnings growth achieved at Dynamic Cables over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

Check out our latest analysis for Dynamic Cables

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

How Is Dynamic Cables' Growth Trending?

Dynamic Cables' P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 22% last year. The latest three year period has also seen an excellent 284% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 24% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's curious that Dynamic Cables' P/E sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Key Takeaway

Dynamic Cables' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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 Dynamic Cables currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

It is also worth noting that we have found 3 warning signs for Dynamic Cables that you need to take into consideration.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.