A Piece Of The Puzzle Missing From Global Education Limited's (NSE:GLOBAL) Share Price

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 34x, you may consider Global Education Limited (NSE:GLOBAL) as a highly attractive investment with its 13.2x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Earnings have risen firmly for Global Education recently, which is pleasing to see. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Global Education

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 Global Education's earnings, revenue and cash flow.

Is There Any Growth For Global Education?

Global Education's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 17%. The strong recent performance means it was also able to grow EPS by 411% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 26% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Global Education's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Global Education's P/E

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Global Education currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Global Education you should be aware 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.