Earnings Tell The Story For Y.D. More Investments Ltd (TLV:MRIN) As Its Stock Soars 27%

Despite an already strong run, Y.D. More Investments Ltd (TLV:MRIN) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 244% following the latest surge, making investors sit up and take notice.

After such a large jump in price, Y.D. More Investments' price-to-earnings (or "P/E") ratio of 21.6x might make it look like a sell right now compared to the market in Israel, where around half of the companies have P/E ratios below 16x and even P/E's below 10x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

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Y.D. More Investments certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It seems that many are expecting the strong 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 Y.D. More Investments

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 Y.D. More Investments' earnings, revenue and cash flow.

Does Growth Match The High P/E?

In order to justify its P/E ratio, Y.D. More Investments 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 39%. The latest three year period has also seen an excellent 157% 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 only predicted to deliver 9.1% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's understandable that Y.D. More Investments' P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Final Word

The large bounce in Y.D. More Investments' shares has lifted the company's P/E to a fairly high level. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Y.D. More Investments maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. 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 Y.D. More Investments 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.