SIL Investments Limited (NSE:SILINV) surged 28% but its low P/E ratio means there’s no need to get excited

SIL Investments Limited (NSE:SILINV) shareholders will be pleased to know that the stock has had a great month, with the share price up 28%, recovering from earlier weakness. Looking back a little further, it’s encouraging to see that the share price is up 88% in the past year.

Even after such a significant increase in price, SIL Investments’ P/E ratio of 21.8x still seems like an attractive investment given that around half of Indian companies have a price-to-earnings (or “P/E”) ratio of over 34x. However, it would be unwise to take the P/E at face value as this may explain why the P/E is limited.

SIL Investments has been doing well recently, growing its earnings at a good pace. One possibility is that its price-to-earnings multiple is low because investors believe that this strong earnings growth may be lower than the overall market in the near future. If you’re interested in this company, you’ll hope that’s not the case, so you might be able to buy shares while they’re falling out of favor.

Check out our latest analysis for SIL Investments

While there are no analyst forecasts, checking the company’s recent developments can give you an idea of ​​what the future holds for the company. free SIL Investments earnings, revenue and cash flow reports.

Is there growth in SIL investments?

For SIL Investments to justify its P/E ratio, it would need to achieve slower growth than the market.

Looking back, the company’s bottom line grew a respectable 4.8% last year, and what’s encouraging is that EPS is also up a total of 45% from three years ago, thanks in part to growth in the past 12 months, so shareholders would likely have been pleased with this medium-term earnings growth rate.

This contrasts with the rest of the market, which is expected to grow 25% over the next 12 months, and is significantly higher than the company’s recent medium-term annual growth rates.

This information explains why SIL Investments is trading at a lower P/E than the market – most investors likely expect the recent limited growth rate to continue and are therefore willing to pay less for the stock.

SIL Investments P/E Conclusion

Although SIL Investments’ stock price is gaining momentum, its P/E ratio still lags behind most other companies. While one should generally not place undue importance on P/E ratios when making investment decisions, the P/E ratio can reveal a lot about what other market participants think of the company.

As expected, SIL Investments has been found to be maintaining a low P/E as its recent three-year growth has lagged the overall market’s expectations. At the moment, investors feel that the potential for earnings improvement is not great enough to justify an increase in the P/E ratio. The stock will likely continue to have a barrier around these levels unless recent medium-term conditions improve.

So what about other risks? Every company has risks. We 2 warning signs for SIL Investments You should know.

of course, You might be able to find a better stock than SIL InvestmentsSo you might want to take a look at this free A collection of other companies with reasonable P/E ratios and strong earnings growth.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

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