Getting In Cheap On Shree Tirupati Balajee FIBC Limited (NSE:TIRUPATI) Is Unlikely

Shree Tirupati Balajee FIBC Limited's (NSE:TIRUPATI) price-to-earnings (or "P/E") ratio of 40.4x might make it look like a sell right now compared to the market in India, where around half of the companies have P/E ratios below 28x and even P/E's below 16x 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 as high as it is.

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It looks like earnings growth has deserted Shree Tirupati Balajee FIBC recently, which is not something to boast about. It might be that many are expecting an improvement to the uninspiring earnings performance over the coming period, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Shree Tirupati Balajee FIBC

Although there are no analyst estimates available for Shree Tirupati Balajee FIBC, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Shree Tirupati Balajee FIBC's Growth Trending?

In order to justify its P/E ratio, Shree Tirupati Balajee FIBC would need to produce impressive growth in excess of the market.

Retrospectively, the last year delivered virtually the same number to the company's bottom line as the year before. Although pleasingly EPS has lifted 105% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has done a great job of growing earnings over that time.

It's interesting to note that the rest of the market is similarly expected to grow by 25% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Shree Tirupati Balajee FIBC is trading at a high P/E compared to the market. Apparently many investors in the company are more bullish than recent times would indicate and aren't willing to let go of their stock right now. Nevertheless, they may be setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

The Final Word

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Shree Tirupati Balajee FIBC revealed its three-year earnings trends aren't impacting its high P/E as much as we would have predicted, given they look similar to current market expectations. Right now we are uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Shree Tirupati Balajee FIBC (of which 1 doesn't sit too well with us!) you should know about.

Of course, you might also be able to find a better stock than Shree Tirupati Balajee FIBC. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.