Nasdaq
華爾街日報Investors Continue Waiting On Sidelines For Kriti Nutrients Limited (NSE:KRITINUT)
With a price-to-earnings (or "P/E") ratio of 11.4x Kriti Nutrients Limited (NSE:KRITINUT) may be sending very bullish signals at the moment, given that almost half of all companies in India have P/E ratios greater than 26x and even P/E's higher than 49x 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.
For example, consider that Kriti Nutrients' financial performance has been poor lately as its earnings have been in decline. It might be that many expect the disappointing earnings performance to continue or accelerate, which has repressed the P/E. 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 Kriti Nutrients
Is There Any Growth For Kriti Nutrients?
Kriti Nutrients' P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 33%. Even so, admirably EPS has lifted 98% 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.
Comparing that to the market, which is predicted to deliver 25% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised earnings results.
With this information, we find it odd that Kriti Nutrients is trading at a P/E lower than the market. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.
The Key Takeaway
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.
We've established that Kriti Nutrients currently trades on a lower than expected P/E since its recent three-year growth is in line with the wider market forecast. When we see average earnings with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.
Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Kriti Nutrients that you should be aware of.
If you're unsure about the strength of Kriti Nutrients' 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.