Ind-Swift Laboratories Limited (NSE:INDSWFTLAB) Surges 26% Yet Its Low P/E Is No Reason For Excitement

Ind-Swift Laboratories Limited (NSE:INDSWFTLAB) shareholders have had their patience rewarded with a 26% share price jump in the last month. The annual gain comes to 100% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 32x, you may still consider Ind-Swift Laboratories as an attractive investment with its 17.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Ind-Swift Laboratories certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. 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 Ind-Swift Laboratories

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Ind-Swift Laboratories will help you shine a light on its historical performance.

Is There Any Growth For Ind-Swift Laboratories?

There's an inherent assumption that a company should underperform the market for P/E ratios like Ind-Swift Laboratories' to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 283% last year. The strong recent performance means it was also able to grow EPS by 53% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is predicted to deliver 24% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's understandable that Ind-Swift Laboratories' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Key Takeaway

Ind-Swift Laboratories' stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Ind-Swift Laboratories revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 3 warning signs for Ind-Swift Laboratories (1 doesn't sit too well with us!) that you need to take into consideration.

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.