Time Technoplast Limited (NSE:TIMETECHNO) Not Flying Under The Radar

It's not a stretch to say that Time Technoplast Limited's (NSE:TIMETECHNO) price-to-earnings (or "P/E") ratio of 26.7x right now seems quite "middle-of-the-road" compared to the market in India, where the median P/E ratio is around 30x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Time Technoplast 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 moderate because investors think this strong earnings performance might be about to tail off. 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 not quite in favour.

Check out our latest analysis for Time Technoplast

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How Is Time Technoplast's Growth Trending?

The only time you'd be comfortable seeing a P/E like Time Technoplast's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered an exceptional 25% gain to the company's bottom line. Pleasingly, EPS has also lifted 106% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 23% per year as estimated by the one analyst watching the company. Meanwhile, the rest of the market is forecast to expand by 22% per year, which is not materially different.

In light of this, it's understandable that Time Technoplast's P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Time Technoplast maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Time Technoplast that you should be aware of.

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.