After Leaping 29% More Provident Funds Ltd (TLV:MPP) Shares Are Not Flying Under The Radar

Despite an already strong run, More Provident Funds Ltd (TLV:MPP) shares have been powering on, with a gain of 29% in the last thirty days. The last month tops off a massive increase of 139% in the last year.

Since its price has surged higher, given close to half the companies in Israel have price-to-earnings ratios (or "P/E's") below 15x, you may consider More Provident Funds as a stock to avoid entirely with its 25.7x 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 so lofty.

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Earnings have risen firmly for More Provident Funds recently, which is pleasing to see. It might be that many expect the respectable earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for More Provident Funds

Although there are no analyst estimates available for More Provident Funds, 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 More Provident Funds?

There's an inherent assumption that a company should far outperform the market for P/E ratios like More Provident Funds' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 28% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 1,592% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 6.8% shows it's noticeably more attractive on an annualised basis.

With this information, we can see why More Provident Funds 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.

The Bottom Line On More Provident Funds' P/E

More Provident Funds' P/E is flying high just like its stock has during the last month. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of More Provident Funds revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 1 warning sign for More Provident Funds that we have uncovered.

If you're unsure about the strength of More Provident Funds' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.