Investors Still Aren't Entirely Convinced By TAJGVK Hotels & Resorts Limited's (NSE:TAJGVK) Earnings Despite 25% Price Jump

Despite an already strong run, TAJGVK Hotels & Resorts Limited (NSE:TAJGVK) shares have been powering on, with a gain of 25% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 16% is also fairly reasonable.

Although its price has surged higher, there still wouldn't be many who think TAJGVK Hotels & Resorts' price-to-earnings (or "P/E") ratio of 25x is worth a mention when the median P/E in India is similar at about 26x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

With earnings growth that's exceedingly strong of late, TAJGVK Hotels & Resorts has been doing very well. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform 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 not quite in favour.

View our latest analysis for TAJGVK Hotels & Resorts

Although there are no analyst estimates available for TAJGVK Hotels & Resorts, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Does Growth Match The P/E?

In order to justify its P/E ratio, TAJGVK Hotels & Resorts would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 41%. The strong recent performance means it was also able to grow EPS by 1,147% 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.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 25% shows it's noticeably more attractive on an annualised basis.

In light of this, it's curious that TAJGVK Hotels & Resorts' P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

TAJGVK Hotels & Resorts appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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 TAJGVK Hotels & Resorts revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for TAJGVK Hotels & Resorts (1 doesn't sit too well with us) you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.