Bikurey Hasade (Holdings) Ltd (TLV:BKRY) Soars 25% But It's A Story Of Risk Vs Reward

Bikurey Hasade (Holdings) Ltd (TLV:BKRY) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 54% in the last year.

Although its price has surged higher, given about half the companies in Israel have price-to-earnings ratios (or "P/E's") above 15x, you may still consider Bikurey Hasade (Holdings) as an attractive investment with its 10.1x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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With earnings growth that's exceedingly strong of late, Bikurey Hasade (Holdings) 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.

Check out our latest analysis for Bikurey Hasade (Holdings)

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Bikurey Hasade (Holdings)'s earnings, revenue and cash flow.

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 Bikurey Hasade (Holdings)'s to be considered reasonable.

Retrospectively, the last year delivered an exceptional 50% gain to the company's bottom line. The latest three year period has also seen a 27% overall rise in EPS, aided extensively by its short-term performance. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Comparing that to the market, which is predicted to deliver 7.7% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised earnings results.

With this information, we find it odd that Bikurey Hasade (Holdings) is trading at a P/E lower than the market. It may be that most investors are not convinced the company can maintain recent growth rates.

The Final Word

Bikurey Hasade (Holdings)'s stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Bikurey Hasade (Holdings) currently trades on a lower than expected P/E since its recent three-year growth is in line with the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching the company's performance. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with Bikurey Hasade (Holdings) (including 1 which is significant).

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

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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.