Chaman Lal Setia Exports Ltd. (NSE:CLSEL) Stock Catapults 29% Though Its Price And Business Still Lag The Market

Despite an already strong run, Chaman Lal Setia Exports Ltd. (NSE:CLSEL) shares have been powering on, with a gain of 29% in the last thirty days. The last 30 days bring the annual gain to a very sharp 25%.

In spite of the firm bounce in price, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 35x, you may still consider Chaman Lal Setia Exports as a highly attractive investment with its 13.2x 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 limited.

As an illustration, earnings have deteriorated at Chaman Lal Setia Exports over the last year, which is not ideal at all. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming 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 out of favour.

Check out our latest analysis for Chaman Lal Setia Exports

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Chaman Lal Setia Exports' earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The Low P/E?

The only time you'd be truly comfortable seeing a P/E as depressed as Chaman Lal Setia Exports' is when the company's growth is on track to lag the market decidedly.

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 9.9%. Even so, admirably EPS has lifted 56% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

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

With this information, we can see why Chaman Lal Setia Exports is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On Chaman Lal Setia Exports' P/E

Chaman Lal Setia Exports' recent share price jump still sees its P/E sitting firmly flat on the ground. 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 Chaman Lal Setia Exports maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Chaman Lal Setia Exports.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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