Enfuse Solutions Limited (NSE:ENFUSE) Doing What It Can To Lift Shares

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 34x, you may consider Enfuse Solutions Limited (NSE:ENFUSE) as an attractive investment with its 24.3x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Enfuse Solutions certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Enfuse Solutions

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Enfuse Solutions will help you shine a light on its historical performance.

How Is Enfuse Solutions' Growth Trending?

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

If we review the last year of earnings growth, the company posted a terrific increase of 66%. The strong recent performance means it was also able to grow EPS by 154% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 26% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that Enfuse Solutions is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

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 Enfuse Solutions currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. 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 - Enfuse Solutions has 3 warning signs (and 1 which can't be ignored) we think you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.