Market Might Still Lack Some Conviction On Niraj Cement Structurals Limited (NSE:NIRAJ) Even After 26% Share Price Boost

Niraj Cement Structurals Limited (NSE:NIRAJ) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 40% over that time.

Even after such a large jump in price, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 27x, you may still consider Niraj Cement Structurals as a highly attractive investment with its 10.8x P/E ratio. 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.

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Earnings have risen firmly for Niraj Cement Structurals recently, which is pleasing to see. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Niraj Cement Structurals

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

Is There Any Growth For Niraj Cement Structurals?

The only time you'd be truly comfortable seeing a P/E as depressed as Niraj Cement Structurals' is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered a decent 9.0% gain to the company's bottom line. This was backed up an excellent period prior to see EPS up by 347% 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.

In light of this, it's peculiar that Niraj Cement Structurals' 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 Key Takeaway

Niraj Cement Structurals' recent share price jump still sees its P/E sitting firmly flat on the ground. 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.

We've established that Niraj Cement Structurals currently trades on a much 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 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 need to take note of risks, for example - Niraj Cement Structurals has 4 warning signs (and 3 which are significant) we think you should know about.

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.