Antony Waste Handling Cell Limited (NSE:AWHCL) Held Back By Insufficient Growth Even After Shares Climb 27%

Antony Waste Handling Cell Limited (NSE:AWHCL) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 66%.

In spite of the firm bounce in price, Antony Waste Handling Cell may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 17.8x, since almost half of all companies in India have P/E ratios greater than 35x and even P/E's higher than 67x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Antony Waste Handling Cell has been doing a good job lately as it's been growing earnings at a solid pace. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. 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 Antony Waste Handling Cell

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

Is There Any Growth For Antony Waste Handling Cell?

In order to justify its P/E ratio, Antony Waste Handling Cell 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 26%. Pleasingly, EPS has also lifted 76% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

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 Antony Waste Handling Cell is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

What We Can Learn From Antony Waste Handling Cell's P/E?

The latest share price surge wasn't enough to lift Antony Waste Handling Cell's P/E close to the market median. 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 Antony Waste Handling Cell 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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about this 1 warning sign we've spotted with Antony Waste Handling Cell.

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

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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.

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