What You Can Learn From Anupam Rasayan India Ltd's (NSE:ANURAS) P/E

When close to half the companies in India have price-to-earnings ratios (or "P/E's") below 29x, you may consider Anupam Rasayan India Ltd (NSE:ANURAS) as a stock to avoid entirely with its 64.4x 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.

Anupam Rasayan India hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Anupam Rasayan India

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How Is Anupam Rasayan India's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Anupam Rasayan India's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 3.9% decrease to the company's bottom line. Even so, admirably EPS has lifted 121% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 32% per annum as estimated by the eight analysts watching the company. That's shaping up to be materially higher than the 19% per annum growth forecast for the broader market.

In light of this, it's understandable that Anupam Rasayan India's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Anupam Rasayan India's P/E

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 Anupam Rasayan India's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Anupam Rasayan India that you should be aware of.

Of course, you might also be able to find a better stock than Anupam Rasayan India. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.