Benign Growth For Ybox Real Estate Ltd. (TLV:YBOX) Underpins Stock's 26% Plummet

Ybox Real Estate Ltd. (TLV:YBOX) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 36% in that time.

Following the heavy fall in price, given close to half the companies in Israel have price-to-earnings ratios (or "P/E's") above 10x, you may consider Ybox Real Estate as an attractive investment with its 4.7x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Ybox Real Estate has been doing a good job lately as it's been growing earnings at a solid pace. 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.

Check out our latest analysis for Ybox Real Estate

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

What Are Growth Metrics Telling Us About The Low P/E?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 20% last year. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

This is in contrast to the rest of the market, which is expected to grow by 15% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Ybox Real Estate is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Bottom Line On Ybox Real Estate's P/E

Ybox Real Estate's recently weak share price has pulled its P/E below most other companies. 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 Ybox Real Estate maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider and we've discovered 5 warning signs for Ybox Real Estate (2 are potentially serious!) that you should be aware of before investing here.

If you're unsure about the strength of Ybox Real Estate's 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.