WEBULL

Gravita India Limited's (NSE:GRAVITA) Price Is Out Of Tune With Earnings

Simply Wall St · 1d ago

When close to half the companies in India have price-to-earnings ratios (or "P/E's") below 25x, you may consider Gravita India Limited (NSE:GRAVITA) as a stock to potentially avoid with its 37.5x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

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Recent times have been advantageous for Gravita India as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Gravita India

pe-multiple-vs-industry
NSEI:GRAVITA Price to Earnings Ratio vs Industry December 16th 2025
Keen to find out how analysts think Gravita India's future stacks up against the industry? In that case, our free report is a great place to start.

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

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

Retrospectively, the last year delivered an exceptional 29% gain to the company's bottom line. Pleasingly, EPS has also lifted 101% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 17% per year as estimated by the eight analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 20% per year, which is noticeably more attractive.

In light of this, it's alarming that Gravita India's P/E sits above the majority of other companies. 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. Only the boldest would assume these prices are sustainable as this level of earnings growth is likely to weigh heavily on the share price eventually.

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

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 Gravita India currently trades on a much higher than expected P/E since its forecast growth is lower than the wider market. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

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

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).