Earnings Working Against V.S.T. Tillers Tractors Limited's (NSE:VSTTILLERS) Share Price

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 32x, you may consider V.S.T. Tillers Tractors Limited (NSE:VSTTILLERS) as an attractive investment with its 25x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With earnings growth that's superior to most other companies of late, V.S.T. Tillers Tractors has been doing relatively well. It might be that many expect the strong 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 V.S.T. Tillers Tractors

If you'd like to see what analysts are forecasting going forward, you should check out our free report on V.S.T. Tillers Tractors.

Is There Any Growth For V.S.T. Tillers Tractors?

In order to justify its P/E ratio, V.S.T. Tillers Tractors would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 70%. Pleasingly, EPS has also lifted 70% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 0.9% as estimated by the three analysts watching the company. That's shaping up to be materially lower than the 24% growth forecast for the broader market.

In light of this, it's understandable that V.S.T. Tillers Tractors' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that V.S.T. Tillers Tractors maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 1 warning sign for V.S.T. Tillers Tractors that we have uncovered.

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.