Earnings Not Telling The Story For Analyst I.M.S. Investment Management Services Ltd (TLV:ANLT) After Shares Rise 25%

Despite an already strong run, Analyst I.M.S. Investment Management Services Ltd (TLV:ANLT) shares have been powering on, with a gain of 25% in the last thirty days. The last month tops off a massive increase of 140% in the last year.

Following the firm bounce in price, Analyst I.M.S. Investment Management Services' price-to-earnings (or "P/E") ratio of 22.3x might make it look like a strong sell right now compared to the market in Israel, where around half of the companies have P/E ratios below 14x and even P/E's below 9x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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

Although there are no analyst estimates available for Analyst I.M.S. Investment Management Services, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Growth For Analyst I.M.S. Investment Management Services?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Analyst I.M.S. Investment Management Services' to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 204%. The latest three year period has also seen an excellent 61% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 23% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

With this information, we find it concerning that Analyst I.M.S. Investment Management Services is trading at a P/E higher than the market. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.

The Final Word

Shares in Analyst I.M.S. Investment Management Services have built up some good momentum lately, which has really inflated its P/E. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Analyst I.M.S. Investment Management Services revealed its three-year earnings trends aren't impacting its high P/E anywhere near as much as we would have predicted, given they look worse than current market expectations. Right now we are increasingly uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you take the next step, you should know about the 1 warning sign for Analyst I.M.S. Investment Management Services that we have uncovered.

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.