Earnings Tell The Story For Globe International Carriers Limited (NSE:GICL) As Its Stock Soars 51%

Globe International Carriers Limited (NSE:GICL) shares have continued their recent momentum with a 51% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 72%.

Following the firm bounce in price, given close to half the companies in India have price-to-earnings ratios (or "P/E's") below 31x, you may consider Globe International Carriers as a stock to avoid entirely with its 65.6x 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.

With earnings growth that's exceedingly strong of late, Globe International Carriers has been doing very well. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for Globe International Carriers

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 Globe International Carriers' earnings, revenue and cash flow.

Is There Enough Growth For Globe International Carriers?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Globe International Carriers' to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 61% last year. Pleasingly, EPS has also lifted 217% in aggregate from three years ago, thanks to the last 12 months of growth. 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 understandable that Globe International Carriers' P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Final Word

Shares in Globe International Carriers have built up some good momentum lately, which has really inflated its P/E. 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.

As we suspected, our examination of Globe International Carriers revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 4 warning signs for Globe International Carriers (1 doesn't sit too well with us!) that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.