Further Upside For Ybox Real Estate Ltd. (TLV:YBOX) Shares Could Introduce Price Risks After 41% Bounce

Ybox Real Estate Ltd. (TLV:YBOX) shares have had a really impressive month, gaining 41% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 3.6% isn't as attractive.

Although its price has surged higher, given about half the companies in Israel have price-to-earnings ratios (or "P/E's") above 12x, you may still consider Ybox Real Estate as an attractive investment with its 8.9x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

For instance, Ybox Real Estate's receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming 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.

View 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.

Is There Any Growth For Ybox Real Estate?

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.

Retrospectively, the last year delivered a frustrating 43% decrease to the company's bottom line. Even so, admirably EPS has lifted 836% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 22% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Ybox Real Estate's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Despite Ybox Real Estate's shares building up a head of steam, its P/E still lags most other companies. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Ybox Real Estate revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. 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. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 5 warning signs for Ybox Real Estate you should be aware of, and 2 of them are a bit concerning.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.