- India
- /
- Oil and Gas
- /
- NSEI:HINDPETRO
Sentiment Still Eluding Hindustan Petroleum Corporation Limited (NSE:HINDPETRO)
Hindustan Petroleum Corporation Limited's (NSE:HINDPETRO) price-to-earnings (or "P/E") ratio of 18.8x might make it look like a 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 62x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
While the market has experienced earnings growth lately, Hindustan Petroleum's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
View our latest analysis for Hindustan Petroleum
Keen to find out how analysts think Hindustan Petroleum's future stacks up against the industry? In that case, our free report is a great place to start.How Is Hindustan Petroleum's Growth Trending?
There's an inherent assumption that a company should underperform the market for P/E ratios like Hindustan Petroleum's to be considered reasonable.
Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 75%. The last three years don't look nice either as the company has shrunk EPS by 54% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.
Looking ahead now, EPS is anticipated to climb by 32% each year during the coming three years according to the analysts following the company. With the market only predicted to deliver 19% per annum, the company is positioned for a stronger earnings result.
In light of this, it's peculiar that Hindustan Petroleum's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Bottom Line On Hindustan Petroleum's P/E
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 Hindustan Petroleum's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.
Plus, you should also learn about these 3 warning signs we've spotted with Hindustan Petroleum (including 1 which makes us a bit uncomfortable).
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.
Valuation is complex, but we're here to simplify it.
Discover if Hindustan Petroleum might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About NSEI:HINDPETRO
Hindustan Petroleum
Engages in the refining and marketing of petroleum products in India and internationally.
Average dividend payer with moderate growth potential.