Even With A 85% Surge, Cautious Investors Are Not Rewarding Wealth First Portfolio Managers Limited's (NSE:WEALTH) Performance Completely

Wealth First Portfolio Managers Limited (NSE:WEALTH) shareholders have had their patience rewarded with a 85% share price jump in the last month. The last 30 days were the cherry on top of the stock's 380% gain in the last year, which is nothing short of spectacular.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Wealth First Portfolio Managers' P/E ratio of 32.8x, since the median price-to-earnings (or "P/E") ratio in India is also close to 35x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Wealth First Portfolio Managers certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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.

Check out our latest analysis for Wealth First Portfolio Managers

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

How Is Wealth First Portfolio Managers' Growth Trending?

The only time you'd be comfortable seeing a P/E like Wealth First Portfolio Managers' is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company grew earnings per share by an impressive 135% last year. The latest three year period has also seen an excellent 256% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

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 Wealth First Portfolio Managers' 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 Bottom Line On Wealth First Portfolio Managers' P/E

Wealth First Portfolio Managers appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

We've established that Wealth First Portfolio Managers currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. 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.

It is also worth noting that we have found 1 warning sign for Wealth First Portfolio Managers that you need to take into consideration.

Of course, you might also be able to find a better stock than Wealth First Portfolio Managers. 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.

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