Even With A 27% Surge, Cautious Investors Are Not Rewarding Technocraft Industries (India) Limited's (NSE:TIIL) Performance Completely

Despite an already strong run, Technocraft Industries (India) Limited (NSE:TIIL) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days bring the annual gain to a very sharp 74%.

Although its price has surged higher, Technocraft Industries (India) may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 23.8x, since almost half of all companies in India have P/E ratios greater than 31x and even P/E's higher than 61x 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 limited.

The recent earnings growth at Technocraft Industries (India) would have to be considered satisfactory if not spectacular. One possibility is that the P/E is low because investors think this good earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

Check out our latest analysis for Technocraft Industries (India)

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 Technocraft Industries (India)'s earnings, revenue and cash flow.

Is There Any Growth For Technocraft Industries (India)?

There's an inherent assumption that a company should underperform the market for P/E ratios like Technocraft Industries (India)'s to be considered reasonable.

Retrospectively, the last year delivered a decent 5.3% gain to the company's bottom line. The latest three year period has also seen an excellent 97% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is predicted to deliver 25% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised earnings results.

In light of this, it's peculiar that Technocraft Industries (India)'s P/E sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.

What We Can Learn From Technocraft Industries (India)'s P/E?

Despite Technocraft Industries (India)'s shares building up a head of steam, its P/E still lags most other companies. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Technocraft Industries (India) revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching the company's 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.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Technocraft Industries (India) that you should be aware of.

You might be able to find a better investment than Technocraft Industries (India). 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).

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

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.