Investors Give Ecos (India) Mobility & Hospitality Limited (NSE:ECOSMOBLTY) Shares A 26% Hiding

Unfortunately for some shareholders, the Ecos (India) Mobility & Hospitality Limited (NSE:ECOSMOBLTY) share price has dived 26% in the last thirty days, prolonging recent pain. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

Although its price has dipped substantially, Ecos (India) Mobility & Hospitality's price-to-earnings (or "P/E") ratio of 17.9x might still make it look like a buy right now compared to the market in India, where around half of the companies have P/E ratios above 25x and even P/E's above 48x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

The recent earnings growth at Ecos (India) Mobility & Hospitality would have to be considered satisfactory if not spectacular. One possibility is that the P/E is low because investors think this good earnings growth might actually underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for Ecos (India) Mobility & Hospitality

Although there are no analyst estimates available for Ecos (India) Mobility & Hospitality, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Ecos (India) Mobility & Hospitality's Growth Trending?

In order to justify its P/E ratio, Ecos (India) Mobility & Hospitality would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 3.7% last year. The latest three year period has also seen an excellent 508% overall rise in EPS, aided somewhat by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 25% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Ecos (India) Mobility & Hospitality's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Ecos (India) Mobility & Hospitality's P/E

The softening of Ecos (India) Mobility & Hospitality's shares means its P/E is now sitting at a pretty low level. 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 Ecos (India) Mobility & Hospitality revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for Ecos (India) Mobility & Hospitality you should be aware of.

If you're unsure about the strength of Ecos (India) Mobility & Hospitality's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.