There's No Escaping Rudrabhishek Enterprises Limited's (NSE:REPL) Muted Earnings

Rudrabhishek Enterprises Limited's (NSE:REPL) price-to-earnings (or "P/E") ratio of 27.6x might make it look like a buy right now compared to the market in India, where around half of the companies have P/E ratios above 32x and even P/E's above 60x 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 limited.

For instance, Rudrabhishek Enterprises' receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming 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 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.

Does Growth Match The Low P/E?

Rudrabhishek Enterprises' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 12%. Even so, admirably EPS has lifted 50% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 24% shows it's noticeably less attractive on an annualised basis.

With this information, we can see why Rudrabhishek Enterprises is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

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

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Rudrabhishek Enterprises revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 1 warning sign for Rudrabhishek Enterprises that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.