After Leaping 25% Anant Raj Limited (NSE:ANANTRAJ) Shares Are Not Flying Under The Radar

Anant Raj Limited (NSE:ANANTRAJ) shares have continued their recent momentum with a 25% gain in the last month alone. The annual gain comes to 185% following the latest surge, making investors sit up and take notice.

After such a large jump in price, Anant Raj may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 69.6x, since almost half of all companies in India have P/E ratios under 34x and even P/E's lower than 19x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Anant Raj certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Anant Raj

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Anant Raj.

What Are Growth Metrics Telling Us About The High P/E?

Anant Raj's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 71%. Pleasingly, EPS has also lifted 882% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 42% during the coming year according to the sole analyst following the company. With the market only predicted to deliver 25%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Anant Raj's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Anant Raj's P/E

The strong share price surge has got Anant Raj's P/E rushing to great heights as well. 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.

We've established that Anant Raj maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for Anant Raj you should be aware of.

Of course, you might also be able to find a better stock than Anant Raj. 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.