Shree Tirupati Balajee FIBC Limited's (NSE:TIRUPATI) 30% Jump Shows Its Popularity With Investors

Shree Tirupati Balajee FIBC Limited (NSE:TIRUPATI) shareholders have had their patience rewarded with a 30% share price jump in the last month. The last 30 days were the cherry on top of the stock's 529% gain in the last year, which is nothing short of spectacular.

Following the firm bounce in price, given around half the companies in India have price-to-earnings ratios (or "P/E's") below 32x, you may consider Shree Tirupati Balajee FIBC as a stock to potentially avoid with its 46.8x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

Recent times have been quite advantageous for Shree Tirupati Balajee FIBC as its earnings have been rising very briskly. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Shree Tirupati Balajee FIBC

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

Is There Enough Growth For Shree Tirupati Balajee FIBC?

There's an inherent assumption that a company should outperform the market for P/E ratios like Shree Tirupati Balajee FIBC's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 50% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 196% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 25% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why Shree Tirupati Balajee FIBC is trading at such a high P/E compared to the market. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Key Takeaway

The large bounce in Shree Tirupati Balajee FIBC's shares has lifted the company's P/E to a fairly high level. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Shree Tirupati Balajee FIBC maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Shree Tirupati Balajee FIBC (1 is a bit concerning) you should be aware of.

You might be able to find a better investment than Shree Tirupati Balajee FIBC. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com