Venus Remedies Limited's (NSE:VENUSREM) Business And Shares Still Trailing The Market

With a price-to-earnings (or "P/E") ratio of 12.4x Venus Remedies Limited (NSE:VENUSREM) may be sending very bullish signals at the moment, given that almost half of all companies in India have P/E ratios greater than 26x and even P/E's higher than 50x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

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The earnings growth achieved at Venus Remedies over the last year would be more than acceptable for most companies. It might be that many expect the respectable 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 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.

How Is Venus Remedies' Growth Trending?

In order to justify its P/E ratio, Venus Remedies would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 20%. Still, incredibly EPS has fallen 55% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 25% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

With this information, we are not surprised that Venus Remedies is trading at a P/E lower than the market. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. There's potential for the P/E to fall to even lower levels if the company doesn't improve its profitability.

The Bottom Line On Venus Remedies' 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 Venus Remedies maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. 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 moving strongly in either direction in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Venus Remedies .

You might be able to find a better investment than Venus Remedies. 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.