Analyst I.M.S. Investment Management Services Ltd's (TLV:ANLT) 27% Jump Shows Its Popularity With Investors

Analyst I.M.S. Investment Management Services Ltd (TLV:ANLT) shares have continued their recent momentum with a 27% gain in the last month alone. The annual gain comes to 224% following the latest surge, making investors sit up and take notice.

After such a large jump in price, given around half the companies in Israel have price-to-earnings ratios (or "P/E's") below 16x, you may consider Analyst I.M.S. Investment Management Services as a stock to potentially avoid with its 20.5x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Recent times have been quite advantageous for Analyst I.M.S. Investment Management Services as its earnings have been rising very briskly. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for Analyst I.M.S. Investment Management Services

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Analyst I.M.S. Investment Management Services will help you shine a light on its historical performance.

Does Growth Match The High P/E?

In order to justify its P/E ratio, Analyst I.M.S. Investment Management Services would need to produce impressive growth in excess of the market.

If we review the last year of earnings growth, the company posted a terrific increase of 78%. The latest three year period has also seen an excellent 220% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 9.8% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why Analyst I.M.S. Investment Management Services is trading at such a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

What We Can Learn From Analyst I.M.S. Investment Management Services' P/E?

Analyst I.M.S. Investment Management Services' P/E is getting right up there since its shares have risen strongly. 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 Analyst I.M.S. Investment Management Services maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Analyst I.M.S. Investment Management Services that you need to be mindful of.

If you're unsure about the strength of Analyst I.M.S. Investment Management Services' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.