There's Reason For Concern Over Bharat Rasayan Limited's (NSE:BHARATRAS) Massive 28% Price Jump

Simply Wall St · 07/03 00:00

Bharat Rasayan Limited (NSE:BHARATRAS) shares have had a really impressive month, gaining 28% after a shaky period beforehand. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Since its price has surged higher, Bharat Rasayan's price-to-earnings (or "P/E") ratio of 34x might make it look like a sell right now compared to the market in India, where around half of the companies have P/E ratios below 29x and even P/E's below 16x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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Bharat Rasayan certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Bharat Rasayan

pe-multiple-vs-industry
NSEI:BHARATRAS Price to Earnings Ratio vs Industry July 3rd 2025
Although there are no analyst estimates available for Bharat Rasayan, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Growth For Bharat Rasayan?

In order to justify its P/E ratio, Bharat Rasayan would need to produce impressive growth in excess of the market.

Retrospectively, the last year delivered an exceptional 48% gain to the company's bottom line. Still, incredibly EPS has fallen 20% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Comparing that to the market, which is predicted to deliver 23% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

In light of this, it's alarming that Bharat Rasayan's P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

The Final Word

Bharat Rasayan shares have received a push in the right direction, but its P/E is elevated too. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Bharat Rasayan currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the high P/E lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Bharat Rasayan that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).