Market Might Still Lack Some Conviction On Menif - Financial Services Ltd (TLV:MNIF) Even After 27% Share Price Boost

Menif - Financial Services Ltd (TLV:MNIF) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 61% in the last year.

Even after such a large jump in price, Menif - Financial Services' price-to-earnings (or "P/E") ratio of 8x might still make it look like a buy right now compared to the market in Israel, where around half of the companies have P/E ratios above 14x and even P/E's above 22x are quite common. 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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The earnings growth achieved at Menif - Financial Services over the last year would be more than acceptable for most companies. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Menif - Financial Services

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

How Is Menif - Financial Services' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Menif - Financial Services' is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a terrific increase of 22%. Pleasingly, EPS has also lifted 178% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that Menif - Financial Services is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Menif - Financial Services' P/E?

The latest share price surge wasn't enough to lift Menif - Financial Services' P/E close to the market median. 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 Menif - Financial Services currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Plus, you should also learn about these 3 warning signs we've spotted with Menif - Financial Services (including 2 which are a bit concerning).

Of course, you might also be able to find a better stock than Menif - Financial Services. 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.