Investor Optimism Abounds Mordechai Aviv Taasiot Beniyah (1973) Ltd. (TLV:AVIV) But Growth Is Lacking

With a price-to-earnings (or "P/E") ratio of 15.2x Mordechai Aviv Taasiot Beniyah (1973) Ltd. (TLV:AVIV) 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. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's lofty.

For example, consider that Mordechai Aviv Taasiot Beniyah (1973)'s financial performance has been poor lately as it's earnings have been in decline. One possibility is that the P/E is high because investors think the company will still do enough to outperform the broader market in the near future. If not, then existing shareholders may be quite nervous about the viability of the share price.

View our latest analysis for Mordechai Aviv Taasiot Beniyah (1973)

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 Mordechai Aviv Taasiot Beniyah (1973)'s earnings, revenue and cash flow.

Is There Enough Growth For Mordechai Aviv Taasiot Beniyah (1973)?

In order to justify its P/E ratio, Mordechai Aviv Taasiot Beniyah (1973) would need to produce impressive growth in excess of the market.

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 48%. As a result, earnings from three years ago have also fallen 51% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 0.6% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

In light of this, it's alarming that Mordechai Aviv Taasiot Beniyah (1973)'s P/E sits above the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a very 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 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 Mordechai Aviv Taasiot Beniyah (1973) revealed its shrinking earnings over the medium-term aren't impacting its high P/E anywhere near as much as we would have predicted, given the market is set to grow. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Mordechai Aviv Taasiot Beniyah (1973) (at least 2 which are a bit concerning), and understanding them should be part of your investment process.

Of course, you might also be able to find a better stock than Mordechai Aviv Taasiot Beniyah (1973). So you may wish to see this free collection of other companies that sit on P/E's below 20x and have grown earnings strongly.

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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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