ANI Integrated Services Limited (NSE:AISL) Stock Catapults 27% Though Its Price And Business Still Lag The Market

The ANI Integrated Services Limited (NSE:AISL) share price has done very well over the last month, posting an excellent gain of 27%. The annual gain comes to 168% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, ANI Integrated Services' price-to-earnings (or "P/E") ratio of 29.5x might still 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 35x and even P/E's above 66x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

ANI Integrated Services certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for ANI Integrated Services

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

Is There Any Growth For ANI Integrated Services?

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

Retrospectively, the last year delivered an exceptional 114% gain to the company's bottom line. The latest three year period has also seen a 12% overall rise in EPS, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 26% shows it's noticeably less attractive on an annualised basis.

With this information, we can see why ANI Integrated Services 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.

The Final Word

The latest share price surge wasn't enough to lift ANI Integrated Services' P/E close to the market median. 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.

As we suspected, our examination of ANI Integrated Services revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 3 warning signs for ANI Integrated Services you should be aware of, and 1 of them makes us a bit uncomfortable.

If you're unsure about the strength of ANI Integrated Services' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.