Maitreya Medicare Limited's (NSE:MAITREYA) Price Is Right But Growth Is Lacking After Shares Rocket 41%

Maitreya Medicare Limited (NSE:MAITREYA) shareholders are no doubt pleased to see that the share price has bounced 41% in the last month, although it is still struggling to make up recently lost ground. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

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 32x, you may still consider Maitreya Medicare as an attractive investment with its 18.9x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Maitreya Medicare certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.

View our latest analysis for Maitreya Medicare

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 Maitreya Medicare's earnings, revenue and cash flow.

Is There Any Growth For Maitreya Medicare?

Maitreya Medicare's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered an exceptional 81% gain to the company's bottom line. EPS has also lifted 8.9% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 24% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Maitreya Medicare 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 Maitreya Medicare's P/E

The latest share price surge wasn't enough to lift Maitreya Medicare's P/E close to the market median. 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 Maitreya Medicare maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

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

You might be able to find a better investment than Maitreya Medicare. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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