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Lacklustre Performance Is Driving Indian Railway Finance Corporation Limited's (NSE:IRFC) Low P/E

Simply Wall St · 10/17 00:26

When close to half the companies in India have price-to-earnings ratios (or "P/E's") above 28x, you may consider Indian Railway Finance Corporation Limited (NSE:IRFC) as an attractive investment with its 23.8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Recent times haven't been advantageous for Indian Railway Finance as its earnings have been rising slower than most other companies. The P/E is probably low because investors think this lacklustre 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 Indian Railway Finance

pe-multiple-vs-industry
NSEI:IRFC Price to Earnings Ratio vs Industry October 17th 2025
Keen to find out how analysts think Indian Railway Finance's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Indian Railway Finance?

There's an inherent assumption that a company should underperform the market for P/E ratios like Indian Railway Finance's to be considered reasonable.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 5.2% last year. The latest three year period has also seen a 5.8% overall rise in EPS, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest earnings should grow by 12% per annum over the next three years. With the market predicted to deliver 19% growth per year, the company is positioned for a weaker earnings result.

With this information, we can see why Indian Railway Finance is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

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 Indian Railway Finance maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You need to take note of risks, for example - Indian Railway Finance has 2 warning signs (and 1 which is potentially serious) we think you should know about.

You might be able to find a better investment than Indian Railway Finance. 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).