Investors Still Aren't Entirely Convinced By Utssav CZ Gold Jewels Limited's (NSE:UTSSAV) Earnings Despite 30% Price Jump

Utssav CZ Gold Jewels Limited (NSE:UTSSAV) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 16% is also fairly reasonable.

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 28x, you may still consider Utssav CZ Gold Jewels as an attractive investment with its 22.3x 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 limited.

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Utssav CZ Gold Jewels certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. 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.

See our latest analysis for Utssav CZ Gold Jewels

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 Utssav CZ Gold Jewels' earnings, revenue and cash flow.

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

In order to justify its P/E ratio, Utssav CZ Gold Jewels would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 52% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 429% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 25% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that Utssav CZ Gold Jewels is trading at a P/E lower than the market. 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 Utssav CZ Gold Jewels' 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.

We've established that Utssav CZ Gold Jewels currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Utssav CZ Gold Jewels (2 can't be ignored) you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.