Surana Telecom and Power Limited's (NSE:SURANAT&P) P/E Is Still On The Mark Following 40% Share Price Bounce

Surana Telecom and Power Limited (NSE:SURANAT&P) shares have continued their recent momentum with a 40% gain in the last month alone. The annual gain comes to 195% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, Surana Telecom and Power's price-to-earnings (or "P/E") ratio of 47.3x might make it look like a sell right now compared to the market in India, where around half of the companies have P/E ratios below 34x and even P/E's below 19x 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 as high as it is.

Recent times have been quite advantageous for Surana Telecom and Power as its earnings have been rising very briskly. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Surana Telecom and Power

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Surana Telecom and Power will help you shine a light on its historical performance.

Does Growth Match The High P/E?

Surana Telecom and Power's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 85% last year. The strong recent performance means it was also able to grow EPS by 124% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 25% shows it's noticeably more attractive on an annualised basis.

In light of this, it's understandable that Surana Telecom and Power's P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On Surana Telecom and Power's P/E

Surana Telecom and Power's P/E is getting right up there since its shares have risen strongly. 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.

As we suspected, our examination of Surana Telecom and Power revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 4 warning signs for Surana Telecom and Power (1 is a bit unpleasant!) that you need to take into consideration.

You might be able to find a better investment than Surana Telecom and Power. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com