What You Can Learn From DJ Mediaprint & Logistics Limited's (NSE:DJML) P/E

When close to half the companies in India have price-to-earnings ratios (or "P/E's") below 27x, you may consider DJ Mediaprint & Logistics Limited (NSE:DJML) as a stock to potentially avoid with its 37.7x 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 as high as it is.

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The earnings growth achieved at DJ Mediaprint & Logistics over the last year would be more than acceptable for most companies. One possibility is that the P/E is high because investors think this respectable earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

View our latest analysis for DJ Mediaprint & Logistics

Although there are no analyst estimates available for DJ Mediaprint & Logistics, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is DJ Mediaprint & Logistics' Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like DJ Mediaprint & Logistics' to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 26%. The latest three year period has also seen an excellent 186% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 26% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that DJ Mediaprint & Logistics' P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Bottom Line On DJ Mediaprint & Logistics' P/E

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 DJ Mediaprint & Logistics revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 1 warning sign for DJ Mediaprint & Logistics 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.