Namo eWaste Management Limited's (NSE:NAMOEWASTE) P/E Is Still On The Mark Following 30% Share Price Bounce

Namo eWaste Management Limited (NSE:NAMOEWASTE) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Following the firm bounce in price, Namo eWaste Management's price-to-earnings (or "P/E") ratio of 51.7x might make it look like a strong sell right now compared to the market in India, where around half of the companies have P/E ratios below 30x and even P/E's below 16x are quite common. 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.

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As an illustration, earnings have deteriorated at Namo eWaste Management over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.

Check out our latest analysis for Namo eWaste Management

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

Does Growth Match The High P/E?

Namo eWaste Management's 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 a frustrating 15% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 201% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 23% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why Namo eWaste Management 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

Namo eWaste Management's P/E is flying high just like its stock has during the last month. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Namo eWaste Management 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. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Namo eWaste Management (1 is significant!) that you should be aware of before investing here.

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.