Almogim Holdings Ltd.'s (TLV:ALMA) Price Is Right But Growth Is Lacking After Shares Rocket 26%

Almogim Holdings Ltd. (TLV:ALMA) shares have continued their recent momentum with a 26% gain in the last month alone. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

In spite of the firm bounce in price, given close to half the companies in Israel have price-to-earnings ratios (or "P/E's") above 16x, you may still consider Almogim Holdings as a highly attractive investment with its 4.3x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

For instance, Almogim Holdings' receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Almogim Holdings

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Almogim Holdings' earnings, revenue and cash flow.

Is There Any Growth For Almogim Holdings?

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

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 52%. This means it has also seen a slide in earnings over the longer-term as EPS is down 52% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 31% shows it's an unpleasant look.

With this information, we are not surprised that Almogim Holdings is trading at a P/E lower than the market. However, we think shrinking earnings are unlikely to lead to a stable P/E over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent earnings trends are already weighing down the shares.

The Bottom Line On Almogim Holdings' P/E

Even after such a strong price move, Almogim Holdings' P/E still trails the rest of the market significantly. 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.

We've established that Almogim Holdings maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. If recent medium-term earnings trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Having said that, be aware Almogim Holdings is showing 4 warning signs in our investment analysis, and 1 of those is significant.

You might be able to find a better investment than Almogim Holdings. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a P/E below 20x (but have proven they can grow earnings).

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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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