Lacklustre Performance Is Driving Uniphos Enterprises Limited's (NSE:UNIENTER) Low P/E

Uniphos Enterprises Limited's (NSE:UNIENTER) price-to-earnings (or "P/E") ratio of 28.8x might make it look like a buy right now compared to the market in India, where around half of the companies have P/E ratios above 34x and even P/E's above 65x 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 limited.

The earnings growth achieved at Uniphos Enterprises over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. 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 out of favour.

View our latest analysis for Uniphos Enterprises

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

How Is Uniphos Enterprises' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Uniphos Enterprises' is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a decent 10% gain to the company's bottom line. The latest three year period has also seen a 24% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Comparing that to the market, which is predicted to deliver 26% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

With this information, we can see why Uniphos Enterprises is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From Uniphos Enterprises' P/E?

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.

We've established that Uniphos Enterprises maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Uniphos Enterprises (1 makes us a bit uncomfortable) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.