Graphite India Limited's (NSE:GRAPHITE) Shares Leap 27% Yet They're Still Not Telling The Full Story

Simply Wall St · 6d ago

Graphite India Limited (NSE:GRAPHITE) shareholders have had their patience rewarded with a 27% share price jump in the last month. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 2.6% over the last year.

Although its price has surged higher, Graphite India may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 23.4x, since almost half of all companies in India have P/E ratios greater than 30x and even P/E's higher than 57x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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While the market has experienced earnings growth lately, Graphite India'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 this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Graphite India

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

What Are Growth Metrics Telling Us About The Low P/E?

In order to justify its P/E ratio, Graphite India would need to produce sluggish growth that's trailing the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 43%. This means it has also seen a slide in earnings over the longer-term as EPS is down 8.4% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 97% as estimated by the dual analysts watching the company. With the market only predicted to deliver 23%, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Graphite India's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Graphite India's P/E?

The latest share price surge wasn't enough to lift Graphite India's P/E close to the market median. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Graphite India's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Graphite India, and understanding these should be part of your investment process.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.