Market Still Lacking Some Conviction On Rajesh Exports Limited (NSE:RAJESHEXPO)

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 32x, you may consider Rajesh Exports Limited (NSE:RAJESHEXPO) as a highly attractive investment with its 12.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

Rajesh Exports could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Rajesh Exports

Keen to find out how analysts think Rajesh Exports' future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The Low P/E?

Rajesh Exports' P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 39%. As a result, earnings from three years ago have also fallen 11% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 99% during the coming year according to the one analyst following the company. Meanwhile, the rest of the market is forecast to only expand by 24%, which is noticeably less attractive.

With this information, we find it odd that Rajesh Exports is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Rajesh Exports' P/E

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 Rajesh Exports' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Rajesh Exports, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Rajesh 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.