There's No Escaping CreditAccess Grameen Limited's (NSE:CREDITACC) Muted Earnings

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 33x, you may consider CreditAccess Grameen Limited (NSE:CREDITACC) as a highly attractive investment with its 12.3x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

CreditAccess Grameen could be doing better as it's been growing earnings less than most other companies lately. The P/E is probably low because investors think this lacklustre earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for CreditAccess Grameen

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

How Is CreditAccess Grameen's Growth Trending?

In order to justify its P/E ratio, CreditAccess Grameen would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered a decent 10% gain to the company's bottom line. The latest three year period has also seen an excellent 1,792% overall rise in EPS, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 17% each year as estimated by the analysts watching the company. With the market predicted to deliver 20% growth per year, the company is positioned for a weaker earnings result.

In light of this, it's understandable that CreditAccess Grameen's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From CreditAccess Grameen's 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.

As we suspected, our examination of CreditAccess Grameen's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 2 warning signs for CreditAccess Grameen (1 is concerning!) that you need to be mindful of.

Of course, you might also be able to find a better stock than CreditAccess Grameen. 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.