Potential Upside For Emaar Properties PJSC (DFM:EMAAR) Not Without Risk

When close to half the companies in the United Arab Emirates have price-to-earnings ratios (or "P/E's") above 14x, you may consider Emaar Properties PJSC (DFM:EMAAR) as a highly attractive investment with its 6.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

With earnings growth that's superior to most other companies of late, Emaar Properties PJSC has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Emaar Properties PJSC

Want the full picture on analyst estimates for the company? Then our free report on Emaar Properties PJSC will help you uncover what's on the horizon.

Is There Any Growth For Emaar Properties PJSC?

In order to justify its P/E ratio, Emaar Properties PJSC would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 38%. The strong recent performance means it was also able to grow EPS by 334% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 2.6% each year over the next three years. With the market predicted to deliver 3.7% growth per annum, the company is positioned for a comparable earnings result.

With this information, we find it odd that Emaar Properties PJSC is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

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.

Our examination of Emaar Properties PJSC's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Emaar Properties PJSC that you should be aware of.

You might be able to find a better investment than Emaar Properties PJSC. 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).

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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.