Wesure Global Tech Ltd's (TLV:WESR) Share Price Boosted 26% But Its Business Prospects Need A Lift Too

The Wesure Global Tech Ltd (TLV:WESR) share price has done very well over the last month, posting an excellent gain of 26%. The last month tops off a massive increase of 184% in the last year.

Even after such a large jump in price, given about half the companies in Israel have price-to-earnings ratios (or "P/E's") above 17x, you may still consider Wesure Global Tech as an attractive investment with its 10.1x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Wesure Global Tech certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out 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.

How Is Wesure Global Tech's Growth Trending?

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

Taking a look back first, we see that the company grew earnings per share by an impressive 39% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing that to the market, which is predicted to deliver 17% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

With this information, we can see why Wesure Global Tech is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Key Takeaway

Wesure Global Tech's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Wesure Global Tech maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Wesure Global Tech is showing 1 warning sign in our investment analysis, you should know about.

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.