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What NBCC (India) Limited's (NSE:NBCC) 30% Share Price Gain Is Not Telling You

Simply Wall St · 05/31 02:27

NBCC (India) Limited (NSE:NBCC) shares have continued their recent momentum with a 30% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 30% in the last year.

Since its price has surged higher, NBCC (India)'s price-to-earnings (or "P/E") ratio of 61.6x might make it look like a strong sell right now compared to the market in India, where around half of the companies have P/E ratios below 27x and even P/E's below 16x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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With earnings growth that's superior to most other companies of late, NBCC (India) has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for NBCC (India)

pe-multiple-vs-industry
NSEI:NBCC Price to Earnings Ratio vs Industry May 31st 2025
If you'd like to see what analysts are forecasting going forward, you should check out our free report on NBCC (India).

How Is NBCC (India)'s Growth Trending?

NBCC (India)'s P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered an exceptional 34% gain to the company's bottom line. The latest three year period has also seen an excellent 141% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the lone analyst covering the company suggest earnings should grow by 20% over the next year. With the market predicted to deliver 23% growth , the company is positioned for a weaker earnings result.

With this information, we find it concerning that NBCC (India) is trading at a P/E higher than the market. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

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What We Can Learn From NBCC (India)'s P/E?

Shares in NBCC (India) have built up some good momentum lately, which has really inflated its P/E. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of NBCC (India)'s analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you take the next step, you should know about the 2 warning signs for NBCC (India) that we have uncovered.

You might be able to find a better investment than NBCC (India). If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).