Sentiment Still Eluding Kalpataru Projects International Limited (NSE:KPIL)

There wouldn't be many who think Kalpataru Projects International Limited's (NSE:KPIL) price-to-earnings (or "P/E") ratio of 23.3x is worth a mention when the median P/E in India is similar at about 25x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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With earnings growth that's superior to most other companies of late, Kalpataru Projects International has been doing relatively well. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for Kalpataru Projects International

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Kalpataru Projects International.

Is There Some Growth For Kalpataru Projects International?

The only time you'd be comfortable seeing a P/E like Kalpataru Projects International's is when the company's growth is tracking the market closely.

If we review the last year of earnings growth, the company posted a terrific increase of 51%. The latest three year period has also seen an excellent 32% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 24% each year during the coming three years according to the eleven analysts following the company. With the market only predicted to deliver 20% per year, the company is positioned for a stronger earnings result.

In light of this, it's curious that Kalpataru Projects International's P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Kalpataru Projects International's P/E?

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.

Our examination of Kalpataru Projects International's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see a strong earnings outlook with faster-than-market 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, but investors seem to think future earnings could see some volatility.

It is also worth noting that we have found 2 warning signs for Kalpataru Projects International (1 is potentially serious!) that you need to take into consideration.

You might be able to find a better investment than Kalpataru Projects International. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.