Azrieli Group Ltd's (TLV:AZRG) Shares Not Telling The Full Story

It's not a stretch to say that Azrieli Group Ltd's (TLV:AZRG) price-to-earnings (or "P/E") ratio of 13.2x right now seems quite "middle-of-the-road" compared to the market in Israel, where the median P/E ratio is around 12x. 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.

Azrieli Group certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. 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 Azrieli Group

Keen to find out how analysts think Azrieli Group's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Growth Metrics Telling Us About The P/E?

In order to justify its P/E ratio, Azrieli Group 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 24% last year. The strong recent performance means it was also able to grow EPS by 1,007% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 33% per year during the coming three years according to the one analyst following the company. Meanwhile, the rest of the market is forecast to only expand by 20% per annum, which is noticeably less attractive.

In light of this, it's curious that Azrieli Group's P/E sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Azrieli Group's 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.

We've established that Azrieli Group currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Azrieli Group (at least 1 which is concerning), and understanding them should be part of your investment process.

If these risks are making you reconsider your opinion on Azrieli Group, 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.