DJ Mediaprint & Logistics Limited's (NSE:DJML) 27% Jump Shows Its Popularity With Investors

DJ Mediaprint & Logistics Limited (NSE:DJML) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The last month tops off a massive increase of 172% in the last year.

Following the firm bounce in price, DJ Mediaprint & Logistics may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 71.2x, since almost half of all companies in India have P/E ratios under 34x and even P/E's lower than 19x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With earnings growth that's exceedingly strong of late, DJ Mediaprint & Logistics has been doing very well. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for DJ Mediaprint & Logistics

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 DJ Mediaprint & Logistics' earnings, revenue and cash flow.

Is There Enough Growth For DJ Mediaprint & Logistics?

DJ Mediaprint & Logistics' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered an exceptional 67% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 197% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 25% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we can see why DJ Mediaprint & Logistics is trading at such a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Key Takeaway

The strong share price surge has got DJ Mediaprint & Logistics' P/E rushing to great heights as well. 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.

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

Before you settle on your opinion, we've discovered 2 warning signs for DJ Mediaprint & Logistics that you should be aware of.

You might be able to find a better investment than DJ Mediaprint & Logistics. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.