Lacklustre Performance Is Driving Bajaj Consumer Care Limited's (NSE:BAJAJCON) Low P/E

Bajaj Consumer Care Limited's (NSE:BAJAJCON) price-to-earnings (or "P/E") ratio of 23.8x might make it look like a buy right now compared to the market in India, where around half of the companies have P/E ratios above 31x and even P/E's above 61x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's inferior to most other companies of late, Bajaj Consumer Care has been relatively sluggish. It seems that many are expecting the uninspiring earnings performance to persist, which has repressed the P/E. If you still like the company, you'd be hoping earnings don't get any worse and that you could pick up some stock while it's out of favour.

Check out our latest analysis for Bajaj Consumer Care

Keen to find out how analysts think Bajaj Consumer Care's future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Bajaj Consumer Care would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a decent 15% gain to the company's bottom line. Still, lamentably EPS has fallen 28% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 12% as estimated by the five analysts watching the company. That's shaping up to be materially lower than the 25% growth forecast for the broader market.

With this information, we can see why Bajaj Consumer Care is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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 Bajaj Consumer Care's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Bajaj Consumer Care is showing 3 warning signs in our investment analysis, and 1 of those is significant.

If these risks are making you reconsider your opinion on Bajaj Consumer Care, 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.