Tribhovandas Bhimji Zaveri Limited's (NSE:TBZ) Shares Leap 26% Yet They're Still Not Telling The Full Story

Those holding Tribhovandas Bhimji Zaveri Limited (NSE:TBZ) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last 30 days bring the annual gain to a very sharp 71%.

Although its price has surged higher, Tribhovandas Bhimji Zaveri may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 19.2x, since 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. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Recent times have been quite advantageous for Tribhovandas Bhimji Zaveri as its earnings have been rising very briskly. It might be that many expect the strong 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 Tribhovandas Bhimji Zaveri

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

Is There Any Growth For Tribhovandas Bhimji Zaveri?

The only time you'd be truly comfortable seeing a P/E as low as Tribhovandas Bhimji Zaveri's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 34% gain to the company's bottom line. Pleasingly, EPS has also lifted 176% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 25% 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 odd that Tribhovandas Bhimji Zaveri is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Tribhovandas Bhimji Zaveri's P/E?

Despite Tribhovandas Bhimji Zaveri's shares building up a head of steam, its P/E still lags most other companies. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Tribhovandas Bhimji Zaveri revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

You need to take note of risks, for example - Tribhovandas Bhimji Zaveri has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course, you might also be able to find a better stock than Tribhovandas Bhimji Zaveri. 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.