A Piece Of The Puzzle Missing From Menora Mivtachim Holdings Ltd's (TLV:MMHD) 29% Share Price Climb

Menora Mivtachim Holdings Ltd (TLV:MMHD) shareholders have had their patience rewarded with a 29% share price jump in the last month. The last month tops off a massive increase of 172% in the last year.

Although its price has surged higher, it's still not a stretch to say that Menora Mivtachim Holdings' price-to-earnings (or "P/E") ratio of 13.5x right now seems quite "middle-of-the-road" compared to the market in Israel, where the median P/E ratio is around 15x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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With earnings growth that's exceedingly strong of late, Menora Mivtachim Holdings has been doing very well. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for Menora Mivtachim Holdings

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Menora Mivtachim Holdings' earnings, revenue and cash flow.

Is There Some Growth For Menora Mivtachim Holdings?

The only time you'd be comfortable seeing a P/E like Menora Mivtachim Holdings' is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered an exceptional 41% gain to the company's bottom line. The latest three year period has also seen an excellent 54% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 9.1% shows it's noticeably more attractive on an annualised basis.

In light of this, it's curious that Menora Mivtachim Holdings' P/E sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Menora Mivtachim Holdings' P/E?

Menora Mivtachim Holdings appears to be back in favour with a solid price jump getting its P/E back in line with 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 Menora Mivtachim Holdings currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Menora Mivtachim Holdings that you need to be mindful of.

If these risks are making you reconsider your opinion on Menora Mivtachim Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.