Shyam Metalics and Energy Limited's (NSE:SHYAMMETL) Shares Leap 26% Yet They're Still Not Telling The Full Story

Shyam Metalics and Energy Limited (NSE:SHYAMMETL) shares have continued their recent momentum with a 26% gain in the last month alone. The annual gain comes to 105% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 35x, you may still consider Shyam Metalics and Energy as an attractive investment with its 22.6x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Shyam Metalics and Energy has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 Shyam Metalics and Energy

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shyam Metalics and Energy.

How Is Shyam Metalics and Energy's Growth Trending?

In order to justify its P/E ratio, Shyam Metalics and Energy would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 57% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 24% drop in EPS in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 29% each year during the coming three years according to the five analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 20% per year, which is noticeably less attractive.

In light of this, it's peculiar that Shyam Metalics and Energy's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Shyam Metalics and Energy's P/E

Shyam Metalics and Energy's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Shyam Metalics and Energy currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with Shyam Metalics and Energy.

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).

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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.