Iware Supplychain Services Limited (NSE:IWARE) Soars 26% But It's A Story Of Risk Vs Reward

Despite an already strong run, Iware Supplychain Services Limited (NSE:IWARE) shares have been powering on, with a gain of 26% in the last thirty days. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Even after such a large jump in price, Iware Supplychain Services may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 20.5x, since almost half of all companies in India have P/E ratios greater than 28x and even P/E's higher than 54x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Recent times have been quite advantageous for Iware Supplychain Services as its earnings have been rising very briskly. 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.

See our latest analysis for Iware Supplychain Services

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

How Is Iware Supplychain Services' Growth Trending?

Iware Supplychain Services' P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 92%. The strong recent performance means it was also able to grow EPS by 509% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 25% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Iware Supplychain Services' 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 Final Word

Despite Iware Supplychain Services' shares building up a head of steam, its P/E still lags most other companies. 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 Iware Supplychain Services currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. 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.

Before you take the next step, you should know about the 4 warning signs for Iware Supplychain Services (2 are potentially serious!) that we have uncovered.

Of course, you might also be able to find a better stock than Iware Supplychain Services. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.