Getting In Cheap On Apcotex Industries Limited (NSE:APCOTEXIND) Might Be Difficult

With a median price-to-earnings (or "P/E") ratio of close to 28x in India, you could be forgiven for feeling indifferent about Apcotex Industries Limited's (NSE:APCOTEXIND) P/E ratio of 28x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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With earnings growth that's superior to most other companies of late, Apcotex Industries has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Apcotex Industries

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Is There Some Growth For Apcotex Industries?

In order to justify its P/E ratio, Apcotex Industries would need to produce growth that's similar to the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 39% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 39% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 26% as estimated by the only analyst watching the company. With the market predicted to deliver 25% growth , the company is positioned for a comparable earnings result.

With this information, we can see why Apcotex Industries is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Apcotex Industries' P/E?

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Apcotex Industries maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Having said that, be aware Apcotex Industries is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Apcotex Industries, 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.