Shree Pushkar Chemicals & Fertilisers Limited (NSE:SHREEPUSHK) Shares Fly 32% But Investors Aren't Buying For Growth

Shree Pushkar Chemicals & Fertilisers Limited (NSE:SHREEPUSHK) shareholders have had their patience rewarded with a 32% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 81% in the last year.

In spite of the firm bounce in price, Shree Pushkar Chemicals & Fertilisers may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 24x, since almost half of all companies in India have P/E ratios greater than 32x and even P/E's higher than 61x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With earnings growth that's exceedingly strong of late, Shree Pushkar Chemicals & Fertilisers has been doing very well. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform 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.

View our latest analysis for Shree Pushkar Chemicals & Fertilisers

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

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Shree Pushkar Chemicals & Fertilisers' is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 36% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 9.3% drop in EPS in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

In contrast to the company, the rest of the market is expected to grow by 26% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

With this information, we are not surprised that Shree Pushkar Chemicals & Fertilisers is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as recent earnings trends are already weighing down the shares.

The Key Takeaway

Shree Pushkar Chemicals & Fertilisers' stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 Shree Pushkar Chemicals & Fertilisers maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 2 warning signs we've spotted with Shree Pushkar Chemicals & Fertilisers.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.