With A 30% Price Drop For Greenpanel Industries Limited (NSE:GREENPANEL) You'll Still Get What You Pay For

The Greenpanel Industries Limited (NSE:GREENPANEL) share price has fared very poorly over the last month, falling by a substantial 30%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 35% share price drop.

Although its price has dipped substantially, given close to half the companies in India have price-to-earnings ratios (or "P/E's") below 24x, you may still consider Greenpanel Industries as a stock to avoid entirely with its 38.1x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Greenpanel Industries could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Check out our latest analysis for Greenpanel Industries

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

How Is Greenpanel Industries' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as Greenpanel Industries' is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered a frustrating 56% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 63% in total over the last three years. 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 36% as estimated by the analysts watching the company. With the market only predicted to deliver 25%, the company is positioned for a stronger earnings result.

With this information, we can see why Greenpanel Industries is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Greenpanel Industries' P/E

A significant share price dive has done very little to deflate Greenpanel Industries' very lofty 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 Greenpanel Industries' 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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Greenpanel Industries you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.