Polyram Plastic Industries LTD's (TLV:POLP) Shareholders Might Be Looking For Exit
It's not a stretch to say that Polyram Plastic Industries LTD's (TLV:POLP) price-to-earnings (or "P/E") ratio of 16.2x right now seems quite "middle-of-the-road" compared to the market in Israel, where the median P/E ratio is around 16x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
Polyram Plastic Industries 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 wane, which has kept the P/E from rising. 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 not quite in favour.
View our latest analysis for Polyram Plastic Industries
How Is Polyram Plastic Industries' Growth Trending?
In order to justify its P/E ratio, Polyram Plastic Industries would need to produce growth that's similar to the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 52% last year. Still, incredibly EPS has fallen 15% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
In contrast to the company, the rest of the market is expected to grow by 63% over the next year, which really puts the company's recent medium-term earnings decline into perspective.
With this information, we find it concerning that Polyram Plastic Industries is trading at a fairly similar P/E to the market. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. 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 Polyram Plastic Industries' 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 Polyram Plastic Industries 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.
Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Polyram Plastic Industries with six simple checks will allow you to discover any risks that could be an issue.
If these risks are making you reconsider your opinion on Polyram Plastic Industries, 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. 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.
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About TASE:POLP
Polyram Plastic Industries
Manufactures and supplies thermoplastic compounds in Israel and internationally.
Solid track record with excellent balance sheet.
