Yatharth Hospital & Trauma Care Services Limited's (NSE:YATHARTH) Earnings Haven't Escaped The Attention Of Investors

Yatharth Hospital & Trauma Care Services Limited's (NSE:YATHARTH) price-to-earnings (or "P/E") ratio of 51.4x might make it look like a strong sell right now compared to the market in India, where around half of the companies have P/E ratios below 27x and even P/E's below 15x 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 so lofty.

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With earnings growth that's inferior to most other companies of late, Yatharth Hospital & Trauma Care Services has been relatively sluggish. One possibility is that the P/E is high because investors think this lacklustre earnings performance will improve markedly. If not, then existing shareholders may be very nervous about the viability of the share price.

See our latest analysis for Yatharth Hospital & Trauma Care Services

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Yatharth Hospital & Trauma Care Services.

How Is Yatharth Hospital & Trauma Care Services' Growth Trending?

Yatharth Hospital & Trauma Care Services' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 5.1% last year. The latest three year period has also seen an excellent 132% overall rise in EPS, aided somewhat by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 25% per year as estimated by the three analysts watching the company. With the market only predicted to deliver 20% each year, the company is positioned for a stronger earnings result.

With this information, we can see why Yatharth Hospital & Trauma Care Services is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Yatharth Hospital & Trauma Care 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. Unless these conditions change, they will continue to provide strong support to the share price.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Yatharth Hospital & Trauma Care Services 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.