United Polyfab Gujarat Limited's (NSE:UNITEDPOLY) P/E Is Still On The Mark Following 27% Share Price Bounce

United Polyfab Gujarat Limited (NSE:UNITEDPOLY) shareholders have had their patience rewarded with a 27% share price jump in the last month. Looking further back, the 14% 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, you could still be forgiven for feeling indifferent about United Polyfab Gujarat's P/E ratio of 36.9x, since the median price-to-earnings (or "P/E") ratio in India is also close to 34x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

The earnings growth achieved at United Polyfab Gujarat over the last year would be more than acceptable for most companies. One possibility is that the P/E is moderate because investors think this respectable earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

View our latest analysis for United Polyfab Gujarat

Although there are no analyst estimates available for United Polyfab Gujarat, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is United Polyfab Gujarat's Growth Trending?

The only time you'd be comfortable seeing a P/E like United Polyfab Gujarat's is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 11% last year. This was backed up an excellent period prior to see EPS up by 97% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 25% shows it's about the same on an annualised basis.

With this information, we can see why United Polyfab Gujarat is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What We Can Learn From United Polyfab Gujarat's P/E?

United Polyfab Gujarat appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

As we suspected, our examination of United Polyfab Gujarat revealed its three-year earnings trends are contributing to its P/E, given they look similar to current market expectations. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

It is also worth noting that we have found 3 warning signs for United Polyfab Gujarat (1 is a bit concerning!) that you need to take into consideration.

If you're unsure about the strength of United Polyfab Gujarat'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.