Investors Continue Waiting On Sidelines For Vardhman Textiles Limited (NSE:VTL)

Vardhman Textiles Limited's (NSE:VTL) price-to-earnings (or "P/E") ratio of 19.3x might 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 35x and even P/E's above 64x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

There hasn't been much to differentiate Vardhman Textiles' and the market's earnings growth lately. It might be that many expect the mediocre earnings performance to degrade, which has repressed the P/E. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Vardhman Textiles

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

Is There Any Growth For Vardhman Textiles?

In order to justify its P/E ratio, Vardhman Textiles would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 22%. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 9.1% 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 21% each year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the market is forecast to expand by 20% each year, which is not materially different.

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

The Bottom Line On Vardhman Textiles' P/E

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.

Our examination of Vardhman Textiles' analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Vardhman Textiles that you need to be mindful of.

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.