A Piece Of The Puzzle Missing From JFL Life Sciences Limited's (NSE:JFLLIFE) 26% Share Price Climb

Despite an already strong run, JFL Life Sciences Limited (NSE:JFLLIFE) shares have been powering on, with a gain of 26% in the last thirty days. The last month tops off a massive increase of 101% in the last year.

Although its price has surged higher, there still wouldn't be many who think JFL Life Sciences' price-to-earnings (or "P/E") ratio of 30.9x is worth a mention when the median P/E in India is similar at about 33x. 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.

JFL Life Sciences has been doing a decent job lately as it's been growing earnings at a reasonable pace. One possibility is that the P/E is moderate because investors think this good earnings growth might only be parallel to the broader market in the near future. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

Check out our latest analysis for JFL Life Sciences

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on JFL Life Sciences' earnings, revenue and cash flow.

Does Growth Match The P/E?

There's an inherent assumption that a company should be matching the market for P/E ratios like JFL Life Sciences' to be considered reasonable.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 3.8% last year. The latest three year period has also seen an excellent 237% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 26% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it interesting that JFL Life Sciences is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On JFL Life Sciences' P/E

JFL Life Sciences' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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 JFL Life Sciences currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

Before you take the next step, you should know about the 2 warning signs for JFL Life Sciences that we have uncovered.

If you're unsure about the strength of JFL Life Sciences' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.