Benign Growth For Jindal Saw Limited (NSE:JINDALSAW) Underpins Its Share Price

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 28x, you may consider Jindal Saw Limited (NSE:JINDALSAW) as a highly attractive investment with its 8.8x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

We've discovered 2 warning signs about Jindal Saw. View them for free.

Jindal Saw certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Jindal Saw

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jindal Saw.

Is There Any Growth For Jindal Saw?

The only time you'd be truly comfortable seeing a P/E as depressed as Jindal Saw's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered an exceptional 28% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 316% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 8.4% during the coming year according to the three analysts following the company. With the market predicted to deliver 25% growth , the company is positioned for a weaker earnings result.

In light of this, it's understandable that Jindal Saw's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Jindal Saw's P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Jindal Saw's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 2 warning signs we've spotted with Jindal Saw.

If these risks are making you reconsider your opinion on Jindal Saw, 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.