Further Upside For Wealth First Portfolio Managers Limited (NSE:WEALTH) Shares Could Introduce Price Risks After 28% Bounce

Wealth First Portfolio Managers Limited (NSE:WEALTH) shares have continued their recent momentum with a 28% gain in the last month alone. The last month tops off a massive increase of 289% in the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Wealth First Portfolio Managers' price-to-earnings (or "P/E") ratio of 31.8x is worth a mention when the median P/E in India is similar at about 34x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Wealth First Portfolio Managers certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. 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.

Check out our latest analysis for Wealth First Portfolio Managers

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

How Is Wealth First Portfolio Managers' Growth Trending?

In order to justify its P/E ratio, Wealth First Portfolio Managers would need to produce growth that's similar to the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 121% last year. The strong recent performance means it was also able to grow EPS by 289% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 26% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it interesting that Wealth First Portfolio Managers is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Wealth First Portfolio Managers' P/E?

Wealth First Portfolio Managers' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

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. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Wealth First Portfolio Managers (of which 2 are a bit concerning!) you should know about.

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.