Venus Remedies Limited (NSE:VENUSREM) Stock Catapults 26% Though Its Price And Business Still Lag The Market

Venus Remedies Limited (NSE:VENUSREM) shares have continued their recent momentum with a 26% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 44% in the last year.

In spite of the firm bounce in price, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 30x, you may still consider Venus Remedies as an attractive investment with its 16.3x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Venus Remedies 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 that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Venus Remedies

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

Is There Any Growth For Venus Remedies?

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

If we review the last year of earnings growth, the company posted a terrific increase of 59%. EPS has also lifted 9.9% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Comparing that to the market, which is predicted to deliver 23% 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 Venus Remedies' 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.

What We Can Learn From Venus Remedies' P/E?

The latest share price surge wasn't enough to lift Venus Remedies' P/E close to the market median. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Venus Remedies 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.

Plus, you should also learn about this 1 warning sign we've spotted with Venus Remedies.

Of course, you might also be able to find a better stock than Venus Remedies. 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.