What Is Shreyas Shipping and Logistics’s (NSE:SHREYAS) P/E Ratio After Its Share Price Rocketed? – Simply Wall St News
Shreyas Shipping and Logistics (NSE:SHREYAS) shares have had a really impressive month, gaining 31%, after some slippage. But that will do little to salve the savage burn caused by the 56% share price decline, over the last year.
All else being equal, a sharp share price increase should make a stock less attractive to potential investors. In the long term, share prices tend to follow earnings per share, but in the short term prices bounce around in response to short term factors (which are not always obvious). So some would prefer to hold off buying when there is a lot of optimism towards a stock. Perhaps the simplest way to get a read on investors’ expectations of a business is to look at its Price to Earnings Ratio (PE Ratio). A high P/E implies that investors have high expectations of what a company can achieve compared to a company with a low P/E ratio.
See our latest analysis for Shreyas Shipping and Logistics
Does Shreyas Shipping and Logistics Have A Relatively High Or Low P/E For Its Industry?
Shreyas Shipping and Logistics’s P/E of 9.46 indicates relatively low sentiment towards the stock. We can see in the image below that the average P/E (11.3) for companies in the shipping industry is higher than Shreyas Shipping and Logistics’s P/E.
Shreyas Shipping and Logistics’s P/E tells us that market participants think it will not fare as well as its peers in the same industry. Since the market seems unimpressed with Shreyas Shipping and Logistics, it’s quite possible it could surprise on the upside. It is arguably worth checking if insiders are buying shares, because that might imply they believe the stock is undervalued.
How Growth Rates Impact P/E Ratios
When earnings fall, the ‘E’ decreases, over time. That means unless the share price falls, the P/E will increase in a few years. Then, a higher P/E might scare off shareholders, pushing the share price down.
Shreyas Shipping and Logistics’s earnings per share fell by 65% in the last twelve months. And over the longer term (3 years) earnings per share have decreased 6.2% annually. This growth rate might warrant a low P/E ratio.
Remember: P/E Ratios Don’t Consider The Balance Sheet
The ‘Price’ in P/E reflects the market capitalization of the company. That means it doesn’t take debt or cash into account. Hypothetically, a company could reduce its future P/E ratio by spending its cash (or taking on debt) to achieve higher earnings.
While growth expenditure doesn’t always pay off, the point is that it is a good option to have; but one that the P/E ratio ignores.
How Does Shreyas Shipping and Logistics’s Debt Impact Its P/E Ratio?
Shreyas Shipping and Logistics has net debt worth a very significant 135% of its market capitalization. This level of debt justifies a relatively low P/E, so remain cognizant of the debt, if you’re comparing it to other stocks.
The Verdict On Shreyas Shipping and Logistics’s P/E Ratio
Shreyas Shipping and Logistics’s P/E is 9.5 which is below average (14.0) in the IN market. When you consider that the company has significant debt, and didn’t grow EPS last year, it isn’t surprising that the market has muted expectations. What is very clear is that the market has become less pessimistic about Shreyas Shipping and Logistics over the last month, with the P/E ratio rising from 7.2 back then to 9.5 today. If you like to buy stocks that could be turnaround opportunities, then this one might be a candidate; but if you’re more sensitive to price, then you may feel the opportunity has passed.
When the market is wrong about a stock, it gives savvy investors an opportunity. As value investor Benjamin Graham famously said, ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine. We don’t have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
But note: Shreyas Shipping and Logistics may not be the best stock to buy. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20).
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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