Blue Jet Healthcare Limited's (NSE:BLUEJET) Price In Tune With Earnings

With a price-to-earnings (or "P/E") ratio of 47.3x Blue Jet Healthcare Limited (NSE:BLUEJET) may be sending bearish signals at the moment, given that almost half of all companies in India have P/E ratios under 34x and even P/E's lower than 19x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

Recent times haven't been advantageous for Blue Jet Healthcare as its earnings have been rising slower than most other companies. One possibility is that the P/E is high because investors think this lacklustre earnings performance will improve markedly. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Blue Jet Healthcare

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Blue Jet Healthcare.

How Is Blue Jet Healthcare's Growth Trending?

Blue Jet Healthcare's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. Fortunately, a few good years before that means that it was still able to grow EPS by 18% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next three years should generate growth of 25% each year as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 21% per annum growth forecast for the broader market.

With this information, we can see why Blue Jet Healthcare is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Blue Jet Healthcare's P/E

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 Blue Jet Healthcare maintains its high P/E on the strength of its forecast growth being higher than the wider market, 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 these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Blue Jet Healthcare.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.

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