It's Down 26% But Orbit Exports Limited (NSE:ORBTEXP) Could Be Riskier Than It Looks

The Orbit Exports Limited (NSE:ORBTEXP) share price has fared very poorly over the last month, falling by a substantial 26%. Longer-term, the stock has been solid despite a difficult 30 days, gaining 18% in the last year.

In spite of the heavy fall in price, Orbit Exports may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 11x, since almost half of all companies in India have P/E ratios greater than 29x and even P/E's higher than 55x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

For instance, Orbit Exports' receding earnings in recent times would have to be some food for thought. It might be that many expect the disappointing earnings performance to continue or accelerate, 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.

View our latest analysis for Orbit Exports

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

How Is Orbit Exports' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as depressed as Orbit Exports' is when the company's growth is on track to lag the market decidedly.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 1.6%. Even so, admirably EPS has lifted 800% 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 more attractive on an annualised basis.

In light of this, it's peculiar that Orbit Exports' 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.

What We Can Learn From Orbit Exports' P/E?

Orbit Exports' P/E looks about as weak as its stock price lately. 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.

We've established that Orbit Exports currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. 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 1 warning sign for Orbit Exports that you need to take into consideration.

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.