Is the P / E ratio of Career Point Limited (NSE: CAREERP) really good?

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This article is written for those who want to better use the price / earnings ratios (P / E ratios), we will show you how you can use those of Career Point Limited (NSE: CAREERP) P / E ratio to inform your assessment of the investment opportunity. Based on the last twelve months, The P / E ratio of Career Point is 5.78. This corresponds to a yield of about 17%. "Data-reactid =" 27 "> This article is intended for those who wish to improve the use of price / earnings ratios (P / E ratios) We will show how to use Career's C / B ratio Point Limited (NSE: CAREERP) to inform your assessment of the investment opportunity. The P / E ratio of Career Point is 5.78. This corresponds to a yield of about 17%.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Discover our latest analyzes for Career Point "data-reactid =" 28 "> Discover our latest analyzes for Career Point

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How do you calculate a P / E ratio?

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The formula for P / E is: "data-reactid =" 31 "> The formula for P / E is:

Price / earnings ratio = Share price ÷ Earnings per share (EPS)

Or for the career point:

P / E 5.78 = ¥ 75.6 ÷ 13.09 ₹ (based on the year up to September 2018.)

Is a high price-earnings ratio good?

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A higher P / E ratio means that investors are paying a higher price for every ₹ 1 of the company's income. This is not necessarily good or bad, but high P / E implies relatively high expectations of what a company can achieve in the future. "Data-reactid =" 36 "> Higher P / E ratio means investors pay a higher price for every ₹ 1 of the company's income. This is not necessarily good or bad, but a high P / E implies relatively high expectations of what the company can achieve in the future.

How growth rates affect P / E ratios

P / E ratios primarily reflect market expectations of earnings growth rates. Profit growth means that in the future the "E" will be higher. This means that if the course of the action does not increase, the P / E will be reduced in a few years. Then, a lower P / E should attract more buyers, which would raise the share price.

Career Point has increased its earnings per share by an impressive 16% over the last twelve months. And its annual growth rate of EPS over 5 years is 17%. With this performance, you can expect an above-average P / E ratio.

How does the P / E ratio of Career Point compare to its peers?

The P / E ratio essentially measures a company's market expectations. The image below shows that Career Point has a P / E lower than the average (21.5) for consumer services companies.

NSEI: CAREERP PE PEG Gauge January 12th 19

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This suggests that market players think that Career Point will Underperforming Although current expectations are low, the stock may be underestimated if the situation is better than the market presumes, and if you think the stock is worthwhile, additional research is recommended. often purchasing and selling director. "data-reactid =" 54 "> This suggests that market participants believe that Career Point will perform less well than other companies in its industry.While current expectations are low, the stock could be undervalued if If the stock is interesting, additional research is recommended, for example, I often monitor purchasing and selling director.

Limit: P / E ratios ignore debt and cash in the bank

It is important to note that the P / E ratio takes into account the market capitalization and not the value of the company. This means that it does not take into account debt or cash. In theory, a company can reduce its future P / E ratio by using cash or debt to invest in growth.

Growth spending might be good or bad a few years later, but the fact is that the P / E ratio does not take into account the option (or lack thereof).

Does the debt have an impact on Career Point's P / E?

Career Point's net debt represents 31% of its market capitalization. This is a reasonably large level of debt – all other things being equal, you would expect a much lower P / E than net cash.

Verdict on Career Point C / B ratio

Career Point trades on a P / E ratio of 5.8, which is below the market average of 17. The company did not run out of balance and earnings growth was good last year. The low P / E ratio suggests that current market expectations are moderate, implying that these growth levels will not continue.

<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Investors have an opportunity when market expectations for a stock If it underestimates a company, investors can earn money by buying and holding stocks until the market corrects itself.We have no forecasts from analysts, but the shareholders might want to consider this detailed historical graph data-reactid = "62"> Investors have an opportunity when market expectations of an action are wrong. If it underestimates a company, investors can earn money by buying and holding shares until the market We have no forecasts from analysts, but shareholders might want to consider this detailed historical chart of earnings, revenues and cash flow.

The story continues

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "But note: Career Point may not be the best stock to buy. So take a look at this free list of interesting companies with strong earnings growth recently (and a P / E ratio below 20). "data-reactid =" 67 "> But note: Career Point may not be the best stock to buy. So take a look at this free list of interesting companies with strong earnings growth recently (and a P / E ratio below 20).

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To help readers understand the past volatility of the financial market in the short term, our goal is to provide you with a long-term research analysis based solely on fundamental data. Note that our analysis does not take into account the latest price sensitive business announcements.

The author is an independent contributor and, at the time of publication, was not positioned in the mentioned actions. For errors that need to be corrected, please contact the publisher at editorial-team@simplywallst.com.

"data-reactid =" 68 "> To help readers understand the short-term volatility of the financial market, we aim to provide you with a long-term research analysis based solely on fundamental data. account of the latest price sensitive business announcements.

The author is an independent contributor and, at the time of publication, was not positioned in the mentioned actions. For errors that need to be corrected, please contact the publisher at editorial-team@simplywallst.com.