International Conveyors Limited's (NSE:INTLCONV) Shares Leap 30% Yet They're Still Not Telling The Full Story

International Conveyors Limited (NSE:INTLCONV) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 64% in the last year.

Although its price has surged higher, International Conveyors' price-to-earnings (or "P/E") ratio of 12.2x might still make it look like a strong buy right now compared to the market in India, where around half of the companies have P/E ratios above 28x and even P/E's above 53x 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 so limited.

With earnings growth that's exceedingly strong of late, International Conveyors has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for International Conveyors

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on International Conveyors' earnings, revenue and cash flow.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, International Conveyors would need to produce anemic growth that's substantially trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 115% last year. The strong recent performance means it was also able to grow EPS by 852% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 25% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that International Conveyors is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From International Conveyors' P/E?

International Conveyors' recent share price jump still sees its P/E sitting firmly flat on the ground. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that International Conveyors currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 4 warning signs for International Conveyors you should know about.

If these risks are making you reconsider your opinion on International Conveyors, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.