There's No Escaping The Sandur Manganese & Iron Ores Limited's (NSE:SANDUMA) Muted Earnings Despite A 25% Share Price Rise

The Sandur Manganese & Iron Ores Limited (NSE:SANDUMA) shareholders have had their patience rewarded with a 25% share price jump in the last month. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Although its price has surged higher, Sandur Manganese & Iron Ores' price-to-earnings (or "P/E") ratio of 17.9x might still make it look like a buy right now compared to the market in India, where around half of the companies have P/E ratios above 29x and even P/E's above 54x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

For instance, Sandur Manganese & Iron Ores' receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. 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.

Check out our latest analysis for Sandur Manganese & Iron Ores

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

How Is Sandur Manganese & Iron Ores' Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Sandur Manganese & Iron Ores' to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 54%. This means it has also seen a slide in earnings over the longer-term as EPS is down 27% in total over the last three years. 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 25% shows it's an unpleasant look.

In light of this, it's understandable that Sandur Manganese & Iron Ores' P/E would sit below the majority of other companies. However, we think shrinking earnings are unlikely to lead to a stable P/E over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent earnings trends are already weighing down the shares.

The Bottom Line On Sandur Manganese & Iron Ores' P/E

Despite Sandur Manganese & Iron Ores' shares building up a head of steam, its P/E still lags most other companies. 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.

We've established that Sandur Manganese & Iron Ores maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Sandur Manganese & Iron Ores.

You might be able to find a better investment than Sandur Manganese & Iron Ores. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.