Zaggle Prepaid Ocean Services Limited (NSE:ZAGGLE) Stocks Pounded By 27% But Not Lagging Market On Growth Or Pricing

Zaggle Prepaid Ocean Services Limited (NSE:ZAGGLE) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 56%, which is great even in a bull market.

Although its price has dipped substantially, Zaggle Prepaid Ocean Services' price-to-earnings (or "P/E") ratio of 67.5x might still make it look like a strong sell right now compared to the market in India, where around half of the companies have P/E ratios below 28x and even P/E's below 16x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

Recent times have been advantageous for Zaggle Prepaid Ocean Services as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Zaggle Prepaid Ocean Services

Keen to find out how analysts think Zaggle Prepaid Ocean Services' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Growth Metrics Telling Us About The High P/E?

Zaggle Prepaid Ocean Services' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 69%. As a result, it also grew EPS by 24% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 81% as estimated by the two analysts watching the company. With the market only predicted to deliver 26%, the company is positioned for a stronger earnings result.

With this information, we can see why Zaggle Prepaid Ocean Services is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Zaggle Prepaid Ocean Services' P/E?

Even after such a strong price drop, Zaggle Prepaid Ocean Services' P/E still exceeds the rest of the market significantly. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Zaggle Prepaid Ocean Services maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Zaggle Prepaid Ocean Services that you should be aware of.

Of course, you might also be able to find a better stock than Zaggle Prepaid Ocean Services. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.