Danya Cebus Ltd. (TLV:DNYA) Investors Are Less Pessimistic Than Expected

With a price-to-earnings (or "P/E") ratio of 19x Danya Cebus Ltd. (TLV:DNYA) may be sending bearish signals at the moment, given that almost half of all companies in Israel have P/E ratios under 13x and even P/E's lower than 9x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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For instance, Danya Cebus' receding earnings in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Danya Cebus

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Danya Cebus will help you shine a light on its historical performance.

How Is Danya Cebus' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as high as Danya Cebus' is when the company's growth is on track to outshine the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 8.8%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 18% overall rise in EPS. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been mostly respectable for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 8.3% shows it's noticeably less attractive on an annualised basis.

In light of this, it's alarming that Danya Cebus' P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

The Bottom Line On Danya Cebus' P/E

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Danya Cebus currently trades on a much higher than expected P/E since its recent three-year growth is lower than the wider market forecast. When we see weak earnings with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Danya Cebus that you need to be mindful of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.