Positive Sentiment Still Eludes GPT Infraprojects Limited (NSE:GPTINFRA) Following 25% Share Price Slump

GPT Infraprojects Limited (NSE:GPTINFRA) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. The last month has meant the stock is now only up 8.1% during the last year.

Following the heavy fall in price, GPT Infraprojects' price-to-earnings (or "P/E") ratio of 20.3x might make it look like a buy right now compared to the market in India, where around half of the companies have P/E ratios above 30x and even P/E's above 56x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With earnings growth that's exceedingly strong of late, GPT Infraprojects has been doing very well. 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 that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for GPT Infraprojects

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

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

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

Retrospectively, the last year delivered an exceptional 45% gain to the company's bottom line. The latest three year period has also seen an excellent 188% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 26% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that GPT Infraprojects' 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 Bottom Line On GPT Infraprojects' P/E

The softening of GPT Infraprojects' shares means its P/E is now sitting at a pretty low level. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of GPT Infraprojects 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. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. 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.

Plus, you should also learn about this 1 warning sign we've spotted with GPT Infraprojects.

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.