Osia Hyper Retail Limited (NSE:OSIAHYPER) Shares Fly 86% But Investors Aren't Buying For Growth

The Osia Hyper Retail Limited (NSE:OSIAHYPER) share price has done very well over the last month, posting an excellent gain of 86%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 41% in the last twelve months.

Even after such a large jump in price, Osia Hyper Retail's price-to-earnings (or "P/E") ratio of 17.9x might still 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 29x and even P/E's above 55x 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.

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For example, consider that Osia Hyper Retail's financial performance has been poor lately as its earnings have been in decline. 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.

See our latest analysis for Osia Hyper Retail

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 Osia Hyper Retail's earnings, revenue and cash flow.

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

There's an inherent assumption that a company should underperform the market for P/E ratios like Osia Hyper Retail's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 17% decrease to the company's bottom line. Still, the latest three year period has seen an excellent 49% overall rise in EPS, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

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

In light of this, it's understandable that Osia Hyper Retail's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Final Word

Despite Osia Hyper Retail's shares building up a head of steam, its P/E still lags most other companies. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Osia Hyper Retail revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You need to take note of risks, for example - Osia Hyper Retail has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.

Of course, you might also be able to find a better stock than Osia Hyper Retail. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.