Earnings Not Telling The Story For Rudrabhishek Enterprises Limited (NSE:REPL) After Shares Rise 38%

Rudrabhishek Enterprises Limited (NSE:REPL) shares have had a really impressive month, gaining 38% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 22% is also fairly reasonable.

Even after such a large jump in price, it's still not a stretch to say that Rudrabhishek Enterprises' price-to-earnings (or "P/E") ratio of 33.2x right now seems quite "middle-of-the-road" compared to the market in India, where the median P/E ratio is around 33x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Earnings have risen at a steady rate over the last year for Rudrabhishek Enterprises, which is generally not a bad outcome. It might be that many expect the respectable earnings performance to only match most other companies over the coming period, which has kept the P/E from rising. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

Check out our latest analysis for Rudrabhishek Enterprises

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

Is There Some Growth For Rudrabhishek Enterprises?

Rudrabhishek Enterprises' P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 3.3% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 27% overall drop in EPS. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 26% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

With this information, we find it concerning that Rudrabhishek Enterprises is trading at a fairly similar P/E to the market. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh on the share price eventually.

What We Can Learn From Rudrabhishek Enterprises' P/E?

Rudrabhishek Enterprises' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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 Rudrabhishek Enterprises currently trades on a higher than expected P/E since its recent earnings have been in decline over the medium-term. Right now we are uncomfortable with the P/E as this earnings performance is unlikely to support a more positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you take the next step, you should know about the 2 warning signs for Rudrabhishek Enterprises that we have uncovered.

You might be able to find a better investment than Rudrabhishek Enterprises. 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.