Windlas Biotech Limited (NSE:WINDLAS) Stock Rockets 26% But Many Are Still Ignoring The Company

Despite an already strong run, Windlas Biotech Limited (NSE:WINDLAS) shares have been powering on, with a gain of 26% in the last thirty days. The annual gain comes to 129% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, there still wouldn't be many who think Windlas Biotech's price-to-earnings (or "P/E") ratio of 31.6x is worth a mention when the median P/E in India is similar at about 34x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Windlas Biotech certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for Windlas Biotech

Although there are no analyst estimates available for Windlas Biotech, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Growth For Windlas Biotech?

The only time you'd be comfortable seeing a P/E like Windlas Biotech's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 42%. The latest three year period has also seen an excellent 220% overall rise in EPS, aided 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 Windlas Biotech is trading at a fairly similar P/E to the market. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Windlas Biotech's P/E?

Windlas Biotech's 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.

Our examination of Windlas Biotech revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You always need to take note of risks, for example - Windlas Biotech has 1 warning sign we think you should be aware of.

If you're unsure about the strength of Windlas Biotech's 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.