Bikaji Foods International Limited's (NSE:BIKAJI) Share Price Not Quite Adding Up

When close to half the companies in India have price-to-earnings ratios (or "P/E's") below 26x, you may consider Bikaji Foods International Limited (NSE:BIKAJI) as a stock to avoid entirely with its 68.1x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

We check all companies for important risks. See what we found for Bikaji Foods International in our free report.

Recent times have been advantageous for Bikaji Foods International as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

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If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bikaji Foods International.

How Is Bikaji Foods International's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Bikaji Foods International's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 52% last year. The strong recent performance means it was also able to grow EPS by 245% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 2.4% as estimated by the seven analysts watching the company. With the market predicted to deliver 24% growth , the company is positioned for a weaker earnings result.

In light of this, it's alarming that Bikaji Foods International's P/E sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of earnings growth is likely to weigh heavily on the share price eventually.

What We Can Learn From Bikaji Foods International's P/E?

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Bikaji Foods International currently trades on a much higher than expected P/E since its forecast growth is lower than the wider market. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Bikaji Foods International with six simple checks will allow you to discover any risks that could be an issue.

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.