Vinyas Innovative Technologies Limited's (NSE:VINYAS) Share Price Is Still Matching Investor Opinion Despite 28% Slump

To the annoyance of some shareholders, Vinyas Innovative Technologies Limited (NSE:VINYAS) shares are down a considerable 28% in the last month, which continues a horrid run for the company. Looking at the bigger picture, even after this poor month the stock is up 78% in the last year.

Although its price has dipped substantially, Vinyas Innovative Technologies may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 55.8x, since almost half of all companies in India have P/E ratios under 32x and even P/E's lower than 18x 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 so lofty.

As an illustration, earnings have deteriorated at Vinyas Innovative Technologies over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.

See our latest analysis for Vinyas Innovative 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 Vinyas Innovative Technologies' earnings, revenue and cash flow.

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as Vinyas Innovative Technologies' is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 16%. Even so, admirably EPS has lifted 271% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 26% shows it's noticeably more attractive on an annualised basis.

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

The Bottom Line On Vinyas Innovative Technologies' P/E

Even after such a strong price drop, Vinyas Innovative Technologies' P/E still exceeds the rest of the market significantly. 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 Vinyas Innovative Technologies maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, 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. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Vinyas Innovative Technologies that you should be aware of.

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.