Nagreeka Exports Limited (NSE:NAGREEKEXP) Shares Fly 28% But Investors Aren't Buying For Growth

Nagreeka Exports Limited (NSE:NAGREEKEXP) shares have continued their recent momentum with a 28% gain in the last month alone. Looking further back, the 17% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, Nagreeka Exports' price-to-earnings (or "P/E") ratio of 25.3x might still 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 34x and even P/E's above 64x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been quite advantageous for Nagreeka Exports as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.

Check out our latest analysis for Nagreeka Exports

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 Nagreeka Exports' earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Nagreeka Exports' 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 47%. Pleasingly, EPS has also lifted 33% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 26% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Nagreeka Exports' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On Nagreeka Exports' P/E

The latest share price surge wasn't enough to lift Nagreeka Exports' P/E close to the market median. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Nagreeka Exports 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. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 4 warning signs for Nagreeka Exports (2 are a bit unpleasant!) that we have uncovered.

If these risks are making you reconsider your opinion on Nagreeka Exports, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.