Getting In Cheap On Y.H. Dimri Construction & Development Ltd (TLV:DIMRI) Is Unlikely

With a price-to-earnings (or "P/E") ratio of 15.8x Y.H. Dimri Construction & Development Ltd (TLV:DIMRI) may be sending bearish signals at the moment, given that almost half of all companies in Israel have P/E ratios under 11x and even P/E's lower than 7x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's exceedingly strong of late, Y.H. Dimri Construction & Development has been doing very well. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Y.H. Dimri Construction & Development

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Y.H. Dimri Construction & Development will help you shine a light on its historical performance.

Is There Enough Growth For Y.H. Dimri Construction & Development?

The only time you'd be truly comfortable seeing a P/E as high as Y.H. Dimri Construction & Development's is when the company's growth is on track to outshine the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 107% last year. The latest three year period has also seen an excellent 83% 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.

It's interesting to note that the rest of the market is similarly expected to grow by 23% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's curious that Y.H. Dimri Construction & Development's P/E sits above the majority of other companies. Apparently many investors in the company are more bullish than recent times would indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as a continuation of recent earnings trends would weigh down the share price eventually.

The Final Word

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Y.H. Dimri Construction & Development revealed its three-year earnings trends aren't impacting its high P/E as much as we would have predicted, given they look similar to current market expectations. Right now we are uncomfortable with the high P/E as this earnings performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Y.H. Dimri Construction & Development (at least 1 which is a bit unpleasant), and understanding these should be part of your investment process.

You might be able to find a better investment than Y.H. Dimri Construction & Development. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.