What Does Shikun & Binui Ltd.'s (TLV:SKBN) Share Price Indicate?

Shikun & Binui Ltd. (TLV:SKBN), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the TASE. As a ₪7.0b market-cap stock, it seems odd Shikun & Binui is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at Shikun & Binui’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Shikun & Binui

What Is Shikun & Binui Worth?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Shikun & Binui’s ratio of 67.64x is above its peer average of 12.91x, which suggests the stock is trading at a higher price compared to the Construction industry. Another thing to keep in mind is that Shikun & Binui’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What kind of growth will Shikun & Binui generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Shikun & Binui's revenue growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in SKBN’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SKBN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SKBN for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for SKBN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Shikun & Binui at this point in time. For example, we've found that Shikun & Binui has 3 warning signs (2 don't sit too well with us!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Shikun & Binui, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.