Getting In Cheap On Clal Insurance Enterprises Holdings Ltd. (TLV:CLIS) Is Unlikely

It's not a stretch to say that Clal Insurance Enterprises Holdings Ltd.'s (TLV:CLIS) price-to-sales (or "P/S") ratio of 0.2x seems quite "middle-of-the-road" for Insurance companies in Israel, seeing as it matches the P/S ratio of the wider industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Clal Insurance Enterprises Holdings

What Does Clal Insurance Enterprises Holdings' Recent Performance Look Like?

Recent times have been quite advantageous for Clal Insurance Enterprises Holdings as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. 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 not quite in favour.

Although there are no analyst estimates available for Clal Insurance Enterprises Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Clal Insurance Enterprises Holdings?

The only time you'd be comfortable seeing a P/S like Clal Insurance Enterprises Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 194% gain to the company's top line. Still, revenue has fallen 5.2% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 1.4% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's somewhat alarming that Clal Insurance Enterprises Holdings' P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What We Can Learn From Clal Insurance Enterprises Holdings' P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We find it unexpected that Clal Insurance Enterprises Holdings trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Clal Insurance Enterprises Holdings with six simple checks on some of these key factors.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com