Take Care Before Jumping Onto Wesure Global Tech Ltd (TLV:WESR) Even Though It's 31% Cheaper

Wesure Global Tech Ltd (TLV:WESR) shares have had a horrible month, losing 31% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 39%, which is great even in a bull market.

In spite of the heavy fall in price, given about half the companies in Israel have price-to-earnings ratios (or "P/E's") above 12x, you may still consider Wesure Global Tech as a highly attractive investment with its 5.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Wesure Global Tech has been doing a good job lately as it's been growing earnings at a solid pace. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

View our latest analysis for Wesure Global Tech

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

Does Growth Match The Low P/E?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Wesure Global Tech's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 29% last year. The strong recent performance means it was also able to grow EPS by 485% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 11% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Wesure Global Tech's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Wesure Global Tech's P/E

Shares in Wesure Global Tech have plummeted and its P/E is now low enough to touch the ground. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Wesure Global Tech currently trades on a much 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 significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Having said that, be aware Wesure Global Tech is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored.

If these risks are making you reconsider your opinion on Wesure Global Tech, 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.

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