Stock Analysis

Cyient Limited (NSE:CYIENT) Stock's 30% Dive Might Signal An Opportunity But It Requires Some Scrutiny

NSEI:CYIENT
Source: Shutterstock

Cyient Limited (NSE:CYIENT) shares have had a horrible month, losing 30% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 33% in that time.

Since its price has dipped substantially, Cyient's price-to-earnings (or "P/E") ratio of 23.5x might make it look like a buy right now compared to the market in India, where around half of the companies have P/E ratios above 31x and even P/E's above 58x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Cyient hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Cyient

pe-multiple-vs-industry
NSEI:CYIENT Price to Earnings Ratio vs Industry January 27th 2025
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Cyient.

Does Growth Match The Low P/E?

Cyient's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Retrospectively, the last year delivered a frustrating 3.7% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 33% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 23% per annum as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 19% each year, which is noticeably less attractive.

In light of this, it's peculiar that Cyient's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

The softening of Cyient's shares means its P/E is now sitting at a pretty low level. 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 Cyient's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 2 warning signs for Cyient that you need to take into consideration.

You might be able to find a better investment than Cyient. 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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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

About NSEI:CYIENT

Cyient

Provides geospatial, engineering design, information technology (IT) solutions, and data analytic services in North America, Europe, and the Asia Pacific.

Flawless balance sheet established dividend payer.

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