Welspun Living Limited's (NSE:WELSPUNLIV) Shares Leap 29% Yet They're Still Not Telling The Full Story

Simply Wall St · 6d ago

Welspun Living Limited (NSE:WELSPUNLIV) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Unfortunately, despite the strong performance over the last month, the full year gain of 4.9% isn't as attractive.

Even after such a large jump in price, Welspun Living may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 21.5x, since almost half of all companies in India have P/E ratios greater than 26x and even P/E's higher than 50x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Our free stock report includes 2 warning signs investors should be aware of before investing in Welspun Living. Read for free now.

While the market has experienced earnings growth lately, Welspun Living's earnings have gone into reverse gear, which is not great. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Welspun Living

pe-multiple-vs-industry
NSEI:WELSPUNLIV Price to Earnings Ratio vs Industry May 10th 2025
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Welspun Living.

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Welspun Living's is when the company's growth is on track to lag the market.

Taking a look back first, we see that there was hardly any earnings per share growth to speak of for the company over the past year. The longer-term trend has been no better as the company has no earnings growth to show for over the last three years either. Accordingly, shareholders probably wouldn't have been satisfied with the complete absence of medium-term growth.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 24% over the next year. With the market predicted to deliver 24% growth , the company is positioned for a comparable earnings result.

In light of this, it's peculiar that Welspun Living's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

The latest share price surge wasn't enough to lift Welspun Living's P/E close to the market median. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Welspun Living currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. When we see an average earnings outlook with market-like 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.

Before you take the next step, you should know about the 2 warning signs for Welspun Living (1 can't be ignored!) that we have uncovered.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.