Destiny Logistics & Infra Limited (NSE:DESTINY) Soars 25% But It's A Story Of Risk Vs Reward

Despite an already strong run, Destiny Logistics & Infra Limited (NSE:DESTINY) shares have been powering on, with a gain of 25% in the last thirty days. The last 30 days bring the annual gain to a very sharp 45%.

In spite of the firm bounce in price, given close to half the companies in India have price-to-earnings ratios (or "P/E's") above 22x, you may still consider Destiny Logistics & Infra as an attractive investment with its 13.9x 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 limited.

For instance, Destiny Logistics & Infra's receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Check out the opportunities and risks within the IN Logistics industry.

Although there are no analyst estimates available for Destiny Logistics & Infra, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For Destiny Logistics & Infra?

In order to justify its P/E ratio, Destiny Logistics & Infra would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 72% decrease to the company's bottom line. Even so, admirably EPS has lifted 77% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 21% shows it's about the same on an annualised basis.

In light of this, it's peculiar that Destiny Logistics & Infra's P/E sits below the majority of other companies. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Key Takeaway

The latest share price surge wasn't enough to lift Destiny Logistics & Infra's P/E close to the market median. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Destiny Logistics & Infra revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Destiny Logistics & Infra (1 is significant!) that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies that have grown earnings strongly and trade on P/E's below 20x.

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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.