Some Easy Trip Planners Limited (NSE:EASEMYTRIP) Shareholders Look For Exit As Shares Take 27% Pounding

Easy Trip Planners Limited (NSE:EASEMYTRIP) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 22% in that time.

Even after such a large drop in price, given around half the companies in India have price-to-earnings ratios (or "P/E's") below 33x, you may still consider Easy Trip Planners as a stock to potentially avoid with its 49x 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 as high as it is.

For example, consider that Easy Trip Planners' financial performance has been poor lately as its earnings have been in decline. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.

Check out our latest analysis for Easy Trip Planners

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Easy Trip Planners will help you shine a light on its historical performance.

Is There Enough Growth For Easy Trip Planners?

In order to justify its P/E ratio, Easy Trip Planners would need to produce impressive growth in excess of the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 14%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 45% in total over the last three years. 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.

This is in contrast to the rest of the market, which is expected to grow by 26% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we find it concerning that Easy Trip Planners is trading at a P/E higher than the market. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

The Bottom Line On Easy Trip Planners' P/E

Easy Trip Planners' P/E hasn't come down all the way after its stock plunged. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Easy Trip Planners currently trades on a much higher than expected P/E since its recent three-year growth is lower than the wider market forecast. When we see weak earnings with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Having said that, be aware Easy Trip Planners is showing 3 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Easy Trip Planners, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.