Harel Insurance (TASE:HARL) Valuation Check After Strong Net Income and EPS Jump

Harel Insurance Investments and Financial Services (TASE:HARL) just delivered a strong earnings surprise, with net income and earnings per share jumping sharply for both the third quarter and the first nine months versus last year.

See our latest analysis for Harel Insurance Investments & Financial Services.

The upbeat quarterly numbers arrive after a powerful run, with the share price posting a year to date return of around 141 percent and a three year total shareholder return of roughly 338 percent, signaling strong, still positive momentum.

If this kind of performance has you rethinking your watchlist, it could be a good moment to explore fast growing stocks with high insider ownership as you search for the market’s next standout stories.

Yet with the share price already near analyst targets and recent gains far outpacing earnings growth, investors now face a key question: is there still a buying opportunity here, or is the market already pricing in future growth?

Price-to-Earnings of 12.2x: Is it justified?

With shares at ₪125.1, Harel Insurance Investments & Financial Services trades on a 12.2x price to earnings multiple, sitting below the wider IL market but slightly ahead of regional insurance peers.

The price to earnings ratio compares the company’s current share price to its per share earnings. This makes it a useful shorthand for how much investors are willing to pay for each unit of profit in a relatively mature, earnings focused sector like insurance.

Relative to the domestic market, HARL’s 12.2x multiple versus the IL market’s 15.3x suggests investors are not paying a premium for its earnings, even though profits have grown faster than the broader market over the past year and have compounded at roughly 9 percent annually over five years.

However, against the Asian Insurance industry, where the average price to earnings stands at 10.9x and our estimated fair price to earnings ratio for HARL is 11.5x, the current 12.2x looks punchy. This indicates the market may be stretching above what long run fundamentals alone would support.

Explore the SWS fair ratio for Harel Insurance Investments & Financial Services

Result: Price-to-Earnings of 12.2x (ABOUT RIGHT)

However, risks remain, including a valuation already near analyst targets and relatively modest net income growth that could limit future share price gains.

Find out about the key risks to this Harel Insurance Investments & Financial Services narrative.

Another Angle, SWS DCF Model Flags Overvaluation

Our DCF model paints a starker picture, suggesting Harel Insurance Investments & Financial Services is trading well above its estimated fair value of ₪52.13 at the current ₪125.1 share price. If cash flow fundamentals are right, is the recent rally leaning too far ahead of itself?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Harel Insurance Investments & Financial Services for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 920 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Harel Insurance Investments & Financial Services Narrative

If you see the story differently or want to dive into the numbers yourself, you can build a personalized view in under three minutes: Do it your way.

A great starting point for your Harel Insurance Investments & Financial Services research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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