Urban Enviro Waste Management Limited's (NSE:URBAN) Shares Leap 26% Yet They're Still Not Telling The Full Story

Urban Enviro Waste Management Limited (NSE:URBAN) shareholders have had their patience rewarded with a 26% share price jump in the last month. The annual gain comes to 287% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, Urban Enviro Waste Management may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 25x, since almost half of all companies in India have P/E ratios greater than 34x and even P/E's higher than 68x 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 limited.

Recent times have been quite advantageous for Urban Enviro Waste Management as its earnings have been rising very briskly. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform 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 Urban Enviro Waste Management

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 Urban Enviro Waste Management's earnings, revenue and cash flow.

Is There Any Growth For Urban Enviro Waste Management?

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

Retrospectively, the last year delivered an exceptional 158% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 570% 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.

In light of this, it's peculiar that Urban Enviro Waste Management's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Urban Enviro Waste Management's P/E

Urban Enviro Waste Management's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Urban Enviro Waste Management revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It is also worth noting that we have found 4 warning signs for Urban Enviro Waste Management (1 is concerning!) that you need to take into consideration.

If you're unsure about the strength of Urban Enviro Waste Management's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com