Man Infraconstruction Limited's (NSE:MANINFRA) Earnings Are Not Doing Enough For Some Investors

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 30x, you may consider Man Infraconstruction Limited (NSE:MANINFRA) as an attractive investment with its 24.6x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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For instance, Man Infraconstruction's receding earnings in recent times would have to be some food for thought. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. 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.

See our latest analysis for Man Infraconstruction

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 Man Infraconstruction's earnings, revenue and cash flow.

How Is Man Infraconstruction's Growth Trending?

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

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 6.2%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 26% overall rise in EPS. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 23% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Man Infraconstruction's P/E sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Man Infraconstruction maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Man Infraconstruction has 1 warning sign we think you should be aware of.

You might be able to find a better investment than Man Infraconstruction. 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.