Vinsys IT Services India Limited (NSE:VINSYS) Stock Rockets 30% But Many Are Still Ignoring The Company

Vinsys IT Services India Limited (NSE:VINSYS) shares have continued their recent momentum with a 30% gain in the last month alone. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Even after such a large jump in price, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 32x, you may still consider Vinsys IT Services India as an attractive investment with its 25.5x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Vinsys IT Services India has been doing a good job lately as it's been growing earnings at a solid pace. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Vinsys IT Services India

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 Vinsys IT Services India's earnings, revenue and cash flow.

Is There Any Growth For Vinsys IT Services India?

The only time you'd be truly comfortable seeing a P/E as low as Vinsys IT Services India's is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a terrific increase of 15%. The strong recent performance means it was also able to grow EPS by 4,388% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

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

In light of this, it's peculiar that Vinsys IT Services India's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

The latest share price surge wasn't enough to lift Vinsys IT Services India's P/E close to the market median. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Vinsys IT Services India 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.

Having said that, be aware Vinsys IT Services India is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable.

Of course, you might also be able to find a better stock than Vinsys IT Services India. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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

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.