Fintech
Not many are piling into Trust Fintech Limited (NSE:TRUST) for now
With an average price-to-earnings (or “P/E”) ratio of around 34x in India, you could be forgiven for feeling indifferent about Trust Fintech Limited (NSE: TRUST) P/E ratio of 34.1x. However, it is unwise to simply ignore the P/E without explanation, as investors may miss a real opportunity or a costly mistake.
Trust Fintech has certainly done a great job lately, as it has been growing earnings at a very rapid pace. The P/E is likely moderate because investors think that this strong earnings growth may not be enough to outperform the broader market in the near future. If that fails to materialize, then existing shareholders have reason to feel optimistic about the future direction of the stock price.
Discover our latest analysis for Trust Fintech
NSEI:TRUST Price/Earnings Ratio to Industry July 23, 2024 We don’t have analyst forecasts, but you can see how recent trends are positioning the company for the future by checking out our free Trust Fintech Report earnings, revenues and cash flow.
Is growth in line with the P/E ratio?
To justify its P/E ratio, Trust Fintech would need to produce growth similar to the market.
In retrospect, last year produced a bumper 194% gain in the company’s net income. The strong recent performance means it has also been able to grow EPS by 296% in total over the last three years. As a result, shareholders would likely welcome those rates of earnings growth in the medium term.
Comparing this recent medium-term earnings trajectory to the broader market’s forecast of 25% one-year growth, it looks significantly more attractive on an annualized basis.
With this information, we find it interesting that Trust Fintech is trading at a P/E that is quite similar to the market. Apparently some shareholders believe that recent performance is borderline and have accepted lower selling prices.
The final word
While the price-to-earnings ratio shouldn’t be the determining factor in deciding whether or not to buy a stock, it is a good barometer of earnings expectations.
We have determined that Trust Fintech is currently trading at a lower-than-expected P/E, as its recent three-year growth is ahead of broader market expectations. When we see strong earnings with faster-than-market growth, we assume that potential risks are what could pressure the P/E ratio. It appears that some are actually predicting earnings volatility, as the persistence of these recent conditions in the medium term would normally provide a boost to the stock price.
Before you form an opinion, we found out 4 Warning Signs for Trust Fintech (2 are potentially serious!) that you should be aware of.
Obviously, You might even be able to find a better stock than Trust FintechSo you might want to see this free set of other companies that have reasonable P/E ratios and have recorded strong earnings growth.
Valuation is a complex process, but we help simplify it.
Find out if Trust Fintech is potentially overvalued or undervalued by checking out our full analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Do you have any comments about this article? Are you concerned about the content? Get in touch directly with us. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is of a general nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended to constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with focused, long-term analysis based on fundamental data. Please 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.
Valuation is a complex process, but we help simplify it.
Find out if Trust Fintech is potentially overvalued or undervalued by checking out our full analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Do you have any comments about this article? Are you concerned about the content? Get in touch directly with us. Alternatively, send an email editorial-team@simplywallst.com