Not Many Are Piling Into Timescan Logistics (India) Limited (NSE:TIMESCAN) Just Yet

With a price-to-earnings (or "P/E") ratio of 7.8x Timescan Logistics (India) Limited (NSE:TIMESCAN) may be sending very bullish signals at the moment, given that almost half of all companies in India have P/E ratios greater than 21x and even P/E's higher than 46x 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 so limited.

With earnings growth that's exceedingly strong of late, Timescan Logistics (India) has been doing very well. One possibility is that the P/E is low because investors think this strong 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.

View our latest analysis for Timescan Logistics (India)

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

How Is Timescan Logistics (India)'s Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Timescan Logistics (India)'s to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 70% last year. Pleasingly, EPS has also lifted 156% 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 21% 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 peculiar that Timescan Logistics (India)'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 Final Word

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.

Our examination of Timescan Logistics (India) 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. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. 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 2 warning signs for Timescan Logistics (India) you should be aware of, and 1 of them is significant.

Of course, you might also be able to find a better stock than Timescan Logistics (India). So you may wish to see this free collection of other companies that sit on P/E's below 20x 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.