The Market Lifts Wesure Global Tech Ltd (TLV:WESR) Shares 34% But It Can Do More

Wesure Global Tech Ltd (TLV:WESR) shares have continued their recent momentum with a 34% gain in the last month alone. The annual gain comes to 269% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, Wesure Global Tech's price-to-earnings (or "P/E") ratio of 5.3x might still make it look like a strong buy right now compared to the market in Israel, where around half of the companies have P/E ratios above 14x and even P/E's above 22x are quite common. 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 certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Wesure Global Tech

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 Wesure Global Tech's earnings, revenue and cash flow.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Wesure Global Tech would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered an exceptional 190% gain to the company's bottom line. The latest three year period has also seen an excellent 947% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 26% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Wesure Global Tech's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

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

Even after such a strong price move, Wesure Global Tech's P/E still trails the rest of the market significantly. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Wesure Global Tech revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. 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.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Wesure Global Tech 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).

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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.