SMC Global Securities Limited's (NSE:SMCGLOBAL) Shares Leap 34% Yet They're Still Not Telling The Full Story

Despite an already strong run, SMC Global Securities Limited (NSE:SMCGLOBAL) shares have been powering on, with a gain of 34% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 84% in the last year.

Although its price has surged higher, SMC Global Securities' price-to-earnings (or "P/E") ratio of 10.1x might still make it look like a strong buy right now compared to the market in India, where around half of the companies have P/E ratios above 33x and even P/E's above 61x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

SMC Global Securities has been doing a decent job lately as it's been growing earnings at a reasonable pace. It might be that many expect the respectable earnings performance to degrade, 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.

Check out our latest analysis for SMC Global Securities

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

How Is SMC Global Securities' Growth Trending?

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

Retrospectively, the last year delivered a decent 4.6% gain to the company's bottom line. Pleasingly, EPS has also lifted 115% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

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

In light of this, it's peculiar that SMC Global Securities' P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From SMC Global Securities' P/E?

Even after such a strong price move, SMC Global Securities' P/E still trails the rest of the market significantly. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of SMC Global Securities revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. 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 always need to take note of risks, for example - SMC Global Securities has 1 warning sign we think you should be aware of.

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

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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.