Benign Growth For ANI Integrated Services Limited (NSE:AISL) Underpins Stock's 26% Plummet

To the annoyance of some shareholders, ANI Integrated Services Limited (NSE:AISL) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Still, a bad month hasn't completely ruined the past year with the stock gaining 40%, which is great even in a bull market.

After such a large drop in price, ANI Integrated Services' price-to-earnings (or "P/E") ratio of 12.7x 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 26x and even P/E's above 49x 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.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Recent times have been quite advantageous for ANI Integrated Services as its earnings have been rising very briskly. 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 ANI Integrated Services

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 ANI Integrated Services' earnings, revenue and cash flow.

Is There Any Growth For ANI Integrated Services?

ANI Integrated Services' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 48%. The latest three year period has also seen a 13% 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.

This is in contrast to the rest of the market, which is expected to grow by 25% over the next year, materially higher than the company's recent medium-term annualised growth rates.

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.

What We Can Learn From ANI Integrated Services' P/E?

The softening of ANI Integrated Services' shares means its P/E is now sitting at a pretty low level. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 2 warning signs for ANI Integrated Services that you should be aware of.

Of course, you might also be able to find a better stock than ANI Integrated Services. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.