Investors Aren't Buying General Insurance Corporation of India's (NSE:GICRE) Earnings

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 27x, you may consider General Insurance Corporation of India (NSE:GICRE) as a highly attractive investment with its 9.8x 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 limited.

Our free stock report includes 2 warning signs investors should be aware of before investing in General Insurance Corporation of India. Read for free now.

With earnings growth that's inferior to most other companies of late, General Insurance Corporation of India 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 General Insurance Corporation of India

Want the full picture on analyst estimates for the company? Then our free report on General Insurance Corporation of India will help you uncover what's on the horizon.

Is There Any Growth For General Insurance Corporation of India?

In order to justify its P/E ratio, General Insurance Corporation of India would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings growth, the company posted a worthy increase of 10.0%. Pleasingly, EPS has also lifted 322% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the three analysts covering the company suggest earnings growth is heading into negative territory, declining 1.1% per annum over the next three years. That's not great when the rest of the market is expected to grow by 20% each year.

In light of this, it's understandable that General Insurance Corporation of India's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Bottom Line On General Insurance Corporation of India's P/E

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of General Insurance Corporation of India's analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for General Insurance Corporation of India (of which 1 is a bit unpleasant!) you should know about.

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.