Aptus Value Housing Finance India Limited (NSE:APTUS) Could Be Riskier Than It Looks #IndiaFinance

When close to half the companies in India have price-to-earnings ratios (or “P/E’s”) above 27x, you may consider Aptus Value Housing Finance India Limited (NSE:APTUS) as an attractive investment with its 22.6x 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.

We’ve discovered 2 warning signs about Aptus Value Housing Finance India. View them for free.

Aptus Value Housing Finance India’s earnings growth of late has been pretty similar to most other companies. One possibility is that the P/E is low because investors think this modest earnings performance may begin to slide. If you like the company, you’d be hoping this isn’t the case so that you could pick up some stock while it’s out of favour.

See our latest analysis for Aptus Value Housing Finance India

Keen to find out how analysts think Aptus Value Housing Finance India’s future stacks up against the industry? In that case, our free report is a great place to start.

How Is Aptus Value Housing Finance India’s Growth Trending?

There’s an inherent assumption that a company should underperform the market for P/E ratios like Aptus Value Housing Finance India’s to be considered reasonable.

Retrospectively, the last year delivered an exceptional 21% gain to the company’s bottom line. The latest three year period has also seen an excellent 105% overall rise in EPS, aided by its short-term performance. 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 23% per annum as estimated by the analysts watching the company. That’s shaping up to be materially higher than the 18% each year growth forecast for the broader market.

In light of this, it’s peculiar that Aptus Value Housing Finance India’s P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Using the price-to-earnings ratio alone to determine if you should sell your stock isn’t sensible, however it can be a practical guide to the company’s future prospects.

Our examination of Aptus Value Housing Finance 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. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

It’s always necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Aptus Value Housing Finance India (at least 1 which shouldn’t be ignored), and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on Aptus Value Housing Finance Indiaexplore our interactive list of high quality stocks to get an idea of what else is out there.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.