Cautious Investors Not Rewarding Harel Insurance Investments & Financial Services Ltd's (TLV:HARL) Performance Completely

With a median price-to-earnings (or "P/E") ratio of close to 14x in Israel, you could be forgiven for feeling indifferent about Harel Insurance Investments & Financial Services Ltd's (TLV:HARL) P/E ratio of 12.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Our free stock report includes 1 warning sign investors should be aware of before investing in Harel Insurance Investments & Financial Services. Read for free now.

Recent times have been advantageous for Harel Insurance Investments & Financial Services as its earnings have been rising faster than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. 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.

Check out our latest analysis for Harel Insurance Investments & Financial Services

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Harel Insurance Investments & Financial Services.

Does Growth Match The P/E?

Harel Insurance Investments & Financial Services' P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 98% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 19% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 57% during the coming year according to the lone analyst following the company. With the market only predicted to deliver 14%, the company is positioned for a stronger earnings result.

In light of this, it's curious that Harel Insurance Investments & Financial Services' P/E sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Harel Insurance Investments & Financial Services currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Having said that, be aware Harel Insurance Investments & Financial Services is showing 1 warning sign in our investment analysis, you should know about.

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.