Market Might Still Lack Some Conviction On Man Infraconstruction Limited (NSE:MANINFRA) Even After 37% Share Price Boost

The Man Infraconstruction Limited (NSE:MANINFRA) share price has done very well over the last month, posting an excellent gain of 37%. The annual gain comes to 149% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, Man Infraconstruction may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 23.1x, since almost half of all companies in India have P/E ratios greater than 30x and even P/E's higher than 55x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Man Infraconstruction certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. 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.

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?

There's an inherent assumption that a company should underperform the market for P/E ratios like Man Infraconstruction's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 94% gain to the company's bottom line. Pleasingly, EPS has also lifted 6,570% in aggregate from three years ago, thanks to the last 12 months of growth. 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 26% 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 Man Infraconstruction 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.

The Bottom Line On Man Infraconstruction's P/E

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

Our examination of Man Infraconstruction 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. 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for Man Infraconstruction you should be aware of.

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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