Minerva Insurance Company Public Ltd (CSE:MINE) Stock Rockets 77% But Many Are Still Ignoring The Company
Minerva Insurance Company Public Ltd (CSE:MINE) shares have continued their recent momentum with a 77% gain in the last month alone. Looking further back, the 18% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.
Even after such a large jump in price, Minerva Insurance Company may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 3.2x, since almost half of all companies in Cyprus have P/E ratios greater than 7x and even P/E's higher than 10x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.
With earnings growth that's exceedingly strong of late, Minerva Insurance Company has been doing very well. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
View our latest analysis for Minerva Insurance Company
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Minerva Insurance Company will help you shine a light on its historical performance.What Are Growth Metrics Telling Us About The Low P/E?
There's an inherent assumption that a company should underperform the market for P/E ratios like Minerva Insurance Company's to be considered reasonable.
Taking a look back first, we see that the company grew earnings per share by an impressive 166% last year. The strong recent performance means it was also able to grow EPS by 247% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 23% shows it's noticeably more attractive on an annualised basis.
With this information, we find it odd that Minerva Insurance Company is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.
What We Can Learn From Minerva Insurance Company's P/E?
The latest share price surge wasn't enough to lift Minerva Insurance Company's P/E close to the market median. 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 Minerva Insurance Company currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
And what about other risks? Every company has them, and we've spotted 3 warning signs for Minerva Insurance Company you should know about.
You might be able to find a better investment than Minerva Insurance Company. 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.
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About CSE:MINE
Minerva Insurance Company
Provides insurance products for individual and business in Cyprus.
Adequate balance sheet with acceptable track record.