Earnings Working Against Nucleus Software Exports Limited's (NSE:NUCLEUS) Share Price

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 33x, you may consider Nucleus Software Exports Limited (NSE:NUCLEUS) as an attractive investment with its 19x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Nucleus Software Exports hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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.

View our latest analysis for Nucleus Software Exports

Want the full picture on analyst estimates for the company? Then our free report on Nucleus Software Exports will help you uncover what's on the horizon.

How Is Nucleus Software Exports' Growth Trending?

In order to justify its P/E ratio, Nucleus Software Exports would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 23% decrease to the company's bottom line. Even so, admirably EPS has lifted 159% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 16% per annum during the coming three years according to the only analyst following the company. With the market predicted to deliver 19% growth per annum, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Nucleus Software Exports' P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Nucleus Software Exports' P/E

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.

As we suspected, our examination of Nucleus Software Exports' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Nucleus Software Exports that you need to be mindful of.

You might be able to find a better investment than Nucleus Software Exports. 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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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.