Tanla Platforms Limited's (NSE:TANLA) Earnings Are Not Doing Enough For Some Investors

With a price-to-earnings (or "P/E") ratio of 18x Tanla Platforms Limited (NSE:TANLA) may be sending bullish signals at the moment, given that almost half of all companies in India have P/E ratios greater than 28x and even P/E's higher than 54x 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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While the market has experienced earnings growth lately, Tanla Platforms' earnings have gone into reverse gear, which is not great. 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.

Check out our latest analysis for Tanla Platforms

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Tanla Platforms.

How Is Tanla Platforms' Growth Trending?

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

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 12%. The last three years don't look nice either as the company has shrunk EPS by 7.5% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 11% per annum as estimated by the three analysts watching the company. With the market predicted to deliver 19% growth per year, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Tanla Platforms' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Tanla Platforms' P/E?

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.

As we suspected, our examination of Tanla Platforms' 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Tanla Platforms is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Tanla Platforms' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.