Steel Exchange India Limited (NSE: STEELXIND) catapults 28% of shares, although its price and activity still lags the market
Steel Exchange India Limited (NSE: STEELXIND) Shareholders would be delighted to see the stock price have had a good month, posting a 28% gain and recovering from previous weakness. The annual gain stands at 172% after the last push, prompting investors to sit down and take note.
Although its price has risen, Steel Exchange India can still send very bullish signals at the moment with its price-to-earnings (or “P / E”) ratio of 4x, as nearly half of all Indian companies have a P / E ratios greater than 23x and even P / E greater than 52x are not unusual. However, it is not wise to just take the P / E at face value as there may be an explanation why it is so limited.
With extremely strong profit growth lately, Steel Exchange India is doing very well. Many may expect the strong earnings performance to deteriorate significantly, which dampened the P / E. If you like the business, you hope it doesn’t so that you can potentially get some stock back while it’s out of fashion.
See our latest analysis for Steel Exchange India
While there are no analyst estimates available for Steel Exchange India, take a look at this free a data-rich visualization to see how the business compares to profit, revenue, and cash flow.
Is there any growth for Steel Exchange India?
There is an inherent assumption that a company would have to significantly underperform the market for P / E ratios like that of Steel Exchange India to be considered reasonable.
Looking back, we see that the company increased earnings per share by an impressive 116% last year. However, the last three-year period was not as good overall as it failed to generate growth at all. Thus, shareholders would probably not have been too happy with the volatility of growth rates in the medium term.
This contrasts with the rest of the market, which is expected to grow 26% over the next year, significantly higher than the company’s recent mid-term annualized growth rates.
In light of this, it’s understandable that Steel Exchange India’s P / E is below the majority of other companies. It appears that most investors expect the recent limited growth rates to continue into the future and only be willing to pay a reduced amount for the stock.
What can we learn from the P / E of Steel Exchange India?
Even after such a big price move, Steel Exchange India’s P / E still lags behind the rest of the market. It is argued that the price / earnings ratio is a lower measure of value in some industries, but it can be a powerful indicator of corporate sentiment.
We have determined that Steel Exchange India is keeping its P / E low due to its recent weak three-year growth which is below broad market expectations as expected. Right now, shareholders are accepting the low P / E as they admit that future earnings are unlikely to provide any good surprises. Unless recent medium-term conditions improve, they will continue to act as a barrier to the share price around these levels.
It is also worth noting that we have found 5 warning signs for Steel Exchange India (1 is a little worrying!) That you need to take into consideration.
If you are unsure of the strength of Steel Exchange India’s business, why not explore our interactive list of stocks with solid trading fundamentals for other companies that you may have missed.
If you are looking to trade Steel Exchange India, open an account with the cheapest * professional approved platform, Interactive Brokers. Their clients from more than 200 countries and territories trade stocks, options, futures, currencies, bonds and funds around the world from a single integrated account.
This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
*Interactive Brokers Ranked Least Expensive Broker By StockBrokers.com Online Annual Review 2020
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.