Artemis Medicare Services Limited's (NSE:ARTEMISMED) P/E Is Still On The Mark Following 31% Share Price Bounce

The Artemis Medicare Services Limited (NSE:ARTEMISMED) share price has done very well over the last month, posting an excellent gain of 31%. Looking back a bit further, it's encouraging to see the stock is up 92% in the last year.

Since its price has surged higher, given close to half the companies in India have price-to-earnings ratios (or "P/E's") below 33x, you may consider Artemis Medicare Services as a stock to avoid entirely with its 65.8x 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.

With earnings growth that's superior to most other companies of late, Artemis Medicare Services has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as Artemis Medicare Services' is when the company's growth is on track to outshine the market decidedly.

Taking a look back first, we see that the company grew earnings per share by an impressive 25% last year. Pleasingly, EPS has also lifted 633% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 71% during the coming year according to the sole analyst following the company. With the market only predicted to deliver 25%, the company is positioned for a stronger earnings result.

With this information, we can see why Artemis Medicare Services is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

Artemis Medicare Services' P/E is flying high just like its stock has during the last month. 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.

As we suspected, our examination of Artemis Medicare Services' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 1 warning sign for Artemis Medicare Services that we have uncovered.

If these risks are making you reconsider your opinion on Artemis Medicare Services, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

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