Stock Analysis

What You Can Learn From Azrieli Group Ltd's (TLV:AZRG) P/E

TASE:AZRG
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When close to half the companies in Israel have price-to-earnings ratios (or "P/E's") below 11x, you may consider Azrieli Group Ltd (TLV:AZRG) as a stock to avoid entirely with its 19.6x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With earnings that are retreating more than the market's of late, Azrieli Group has been very sluggish. It might be that many expect the dismal earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

See our latest analysis for Azrieli Group

pe-multiple-vs-industry
TASE:AZRG Price to Earnings Ratio vs Industry December 22nd 2023
Want the full picture on analyst estimates for the company? Then our free report on Azrieli Group will help you uncover what's on the horizon.

Is There Enough Growth For Azrieli Group?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Azrieli Group's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 60%. Even so, admirably EPS has lifted 48% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 125% as estimated by the only analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 22%, which is noticeably less attractive.

With this information, we can see why Azrieli Group is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Azrieli Group's P/E

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.

As we suspected, our examination of Azrieli Group's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

You need to take note of risks, for example - Azrieli Group has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Valuation is complex, but we're helping make it simple.

Find out whether Azrieli Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.