Techno Electric & Engineering Company Limited's (NSE:TECHNOE) 29% Jump Shows Its Popularity With Investors

Techno Electric & Engineering Company Limited (NSE:TECHNOE) shares have continued their recent momentum with a 29% gain in the last month alone. The last month tops off a massive increase of 259% in the last year.

Since its price has surged higher, Techno Electric & Engineering may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 52.8x, since almost half of all companies in India have P/E ratios under 30x and even P/E's lower than 17x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With earnings growth that's superior to most other companies of late, Techno Electric & Engineering has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Techno Electric & Engineering

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Techno Electric & Engineering.

How Is Techno Electric & Engineering's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as Techno Electric & Engineering's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 185%. The latest three year period has also seen an excellent 52% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 34% over the next year. With the market only predicted to deliver 25%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Techno Electric & Engineering's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Techno Electric & Engineering's P/E

Techno Electric & Engineering's P/E is flying high just like its stock has during the last month. 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 Techno Electric & Engineering's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Techno Electric & Engineering (1 doesn't sit too well with us!) that you should be aware of before investing here.

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.