Stock Analysis

There's Reason For Concern Over Menora Mivtachim Holdings Ltd's (TLV:MMHD) Price

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There wouldn't be many who think Menora Mivtachim Holdings Ltd's (TLV:MMHD) price-to-earnings (or "P/E") ratio of 11.3x is worth a mention when the median P/E in Israel is similar at about 12x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

As an illustration, earnings have deteriorated at Menora Mivtachim Holdings over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing earnings performance behind them over the coming period, which has kept the P/E from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for Menora Mivtachim Holdings

TASE:MMHD Price to Earnings Ratio vs Industry May 9th 2024
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Menora Mivtachim Holdings will help you shine a light on its historical performance.

How Is Menora Mivtachim Holdings' Growth Trending?

In order to justify its P/E ratio, Menora Mivtachim Holdings would need to produce growth that's similar to the market.

Retrospectively, the last year delivered a frustrating 2.5% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 19% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 22% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Menora Mivtachim Holdings' P/E sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.

The Bottom Line On Menora Mivtachim Holdings' P/E

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.

Our examination of Menora Mivtachim Holdings revealed its shrinking earnings over the medium-term aren't impacting its P/E as much as we would have predicted, given the market is set to grow. Right now we are uncomfortable with the P/E as this earnings performance is unlikely to support a more positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Menora Mivtachim Holdings that you should be aware of.

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).

Valuation is complex, but we're helping make it simple.

Find out whether Menora Mivtachim Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.