The Market Lifts Quicktouch Technologies Limited (NSE:QUICKTOUCH) Shares 29% But It Can Do More

Quicktouch Technologies Limited (NSE:QUICKTOUCH) shares have continued their recent momentum with a 29% gain in the last month alone. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

In spite of the firm bounce in price, Quicktouch Technologies may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 16.4x, since almost half of all companies in India have P/E ratios greater than 28x and even P/E's higher than 53x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's exceedingly strong of late, Quicktouch Technologies has been doing very well. 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 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.

View our latest analysis for Quicktouch Technologies

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Quicktouch Technologies' earnings, revenue and cash flow.

How Is Quicktouch Technologies' Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Quicktouch Technologies' to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 231% last year. Pleasingly, EPS has also lifted 1,756% in aggregate from three years ago, thanks to the last 12 months of growth. 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.

In light of this, it's peculiar that Quicktouch Technologies' P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Quicktouch Technologies' P/E?

Quicktouch Technologies' stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Quicktouch Technologies 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 should always think about risks. Case in point, we've spotted 2 warning signs for Quicktouch Technologies you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.