Krishana Phoschem Limited (NSE:KRISHANA) Stock Rockets 29% But Many Are Still Ignoring The Company

Krishana Phoschem Limited (NSE:KRISHANA) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 5.8% over the last year.

Although its price has surged higher, it's still not a stretch to say that Krishana Phoschem's price-to-earnings (or "P/E") ratio of 24.5x right now seems quite "middle-of-the-road" compared to the market in India, where the median P/E ratio is around 25x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

With earnings growth that's exceedingly strong of late, Krishana Phoschem has been doing very well. 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 Krishana Phoschem

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Krishana Phoschem will help you shine a light on its historical performance.

Does Growth Match The P/E?

Krishana Phoschem's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered an exceptional 42% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 120% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 25% shows it's noticeably more attractive on an annualised basis.

With this information, we find it interesting that Krishana Phoschem is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Krishana Phoschem's P/E

Krishana Phoschem appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. 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.

We've established that Krishana Phoschem currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for Krishana Phoschem you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.