Investor Optimism Abounds Bhageria Industries Limited (NSE:BHAGERIA) But Growth Is Lacking

It's not a stretch to say that Bhageria Industries Limited's (NSE:BHAGERIA) price-to-earnings (or "P/E") ratio of 24.1x right now seems quite "middle-of-the-road" compared to the market in India, where the median P/E ratio is around 27x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

We've discovered 4 warning signs about Bhageria Industries. View them for free.

Recent times have been quite advantageous for Bhageria Industries as its earnings have been rising very briskly. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

View our latest analysis for Bhageria Industries

Although there are no analyst estimates available for Bhageria Industries, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The P/E?

The only time you'd be comfortable seeing a P/E like Bhageria Industries' is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 82%. However, this wasn't enough as the latest three year period has seen a very unpleasant 56% drop in EPS in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 24% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Bhageria Industries' P/E sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh on the share price eventually.

The Bottom Line On Bhageria Industries' P/E

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Bhageria Industries revealed its shrinking earnings over the medium-term aren't impacting its P/E as much as we would have predicted, given the market is set to grow. Right now we are uncomfortable with the P/E as this earnings performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

Plus, you should also learn about these 4 warning signs we've spotted with Bhageria Industries (including 1 which can't be ignored).

Of course, you might also be able to find a better stock than Bhageria Industries. 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.