Earnings Tell The Story For Blue Dart Express Limited (NSE:BLUEDART)

When close to half the companies in India have price-to-earnings ratios (or "P/E's") below 34x, you may consider Blue Dart Express Limited (NSE:BLUEDART) as a stock to avoid entirely with its 67x P/E ratio. 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.

Blue Dart Express hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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Does Growth Match The High P/E?

In order to justify its P/E ratio, Blue Dart Express would need to produce outstanding growth well in excess of the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 6.4%. That put a dampener on the good run it was having over the longer-term as its three-year EPS growth is still a noteworthy 13% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 29% per annum as estimated by the five analysts watching the company. With the market only predicted to deliver 20% each year, the company is positioned for a stronger earnings result.

With this information, we can see why Blue Dart Express is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Blue Dart Express' P/E

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Blue Dart Express 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. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for Blue Dart Express that you need to take into consideration.

If these risks are making you reconsider your opinion on Blue Dart Express, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.