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PNB Housing Finance Limited (NSE:PNBHOUSING) Surges 25% Yet Its Low P/E Is No Reason For Excitement

Simply Wall St · 04/17 00:32

PNB Housing Finance Limited (NSE:PNBHOUSING) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 34%.

Although its price has surged higher, given about half the companies in India have price-to-earnings ratios (or "P/E's") above 27x, you may still consider PNB Housing Finance as an attractive investment with its 14.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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PNB Housing Finance certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for PNB Housing Finance

pe-multiple-vs-industry
NSEI:PNBHOUSING Price to Earnings Ratio vs Industry April 17th 2025
If you'd like to see what analysts are forecasting going forward, you should check out our free report on PNB Housing Finance.

Is There Any Growth For PNB Housing Finance?

In order to justify its P/E ratio, PNB Housing Finance would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 23% last year. The strong recent performance means it was also able to grow EPS by 49% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 16% during the coming year according to the nine analysts following the company. Meanwhile, the rest of the market is forecast to expand by 25%, which is noticeably more attractive.

In light of this, it's understandable that PNB Housing Finance's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Despite PNB Housing Finance's shares building up a head of steam, its P/E still lags most other companies. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that PNB Housing 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 should always think about risks. Case in point, we've spotted 1 warning sign for PNB Housing Finance you should be aware of.

Of course, you might also be able to find a better stock than PNB Housing Finance. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.