Further Upside For Tara Chand Logistic Solutions Limited (NSE:TARACHAND) Shares Could Introduce Price Risks After 27% Bounce

Tara Chand Logistic Solutions Limited (NSE:TARACHAND) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The last month tops off a massive increase of 173% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Tara Chand Logistic Solutions' P/E ratio of 32.5x, since the median price-to-earnings (or "P/E") ratio in India is also close to 33x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's exceedingly strong of late, Tara Chand Logistic Solutions has been doing very well. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. 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 not quite in favour.

See our latest analysis for Tara Chand Logistic Solutions

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

How Is Tara Chand Logistic Solutions' Growth Trending?

The only time you'd be comfortable seeing a P/E like Tara Chand Logistic Solutions' is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 63%. Pleasingly, EPS has also lifted 307% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

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.

In light of this, it's curious that Tara Chand Logistic Solutions' P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Tara Chand Logistic Solutions appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Tara Chand Logistic Solutions revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

You should always think about risks. Case in point, we've spotted 5 warning signs for Tara Chand Logistic Solutions you should be aware of, and 1 of them can't be ignored.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.