Kore Digital Limited (NSE:KDL) Stock Rockets 28% But Many Are Still Ignoring The Company

Those holding Kore Digital Limited (NSE:KDL) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, despite the strong performance over the last month, the full year gain of 9.0% isn't as attractive.

Although its price has surged higher, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 28x, you may still consider Kore Digital as an attractive investment with its 18.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

We've discovered 1 warning sign about Kore Digital. View them for free.

With earnings growth that's exceedingly strong of late, Kore Digital has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Kore Digital

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Kore Digital will help you shine a light on its historical performance.

Is There Any Growth For Kore Digital?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 151% last year. The latest three year period has also seen an excellent 606% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 25% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's peculiar that Kore Digital's 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.

The Key Takeaway

Kore Digital's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 Kore Digital currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Kore Digital that 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.