Levinstein Properties Ltd's (TLV:LVPR) Shareholders Might Be Looking For Exit

With a price-to-earnings (or "P/E") ratio of 53.1x Levinstein Properties Ltd (TLV:LVPR) may be sending very bearish signals at the moment, given that almost half of all companies in Israel have P/E ratios under 17x and even P/E's lower than 10x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

For example, consider that Levinstein Properties' 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Levinstein Properties

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Levinstein Properties will help you shine a light on its historical performance.

Is There Enough Growth For Levinstein Properties?

The only time you'd be truly comfortable seeing a P/E as steep as Levinstein Properties' is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered a frustrating 74% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 80% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 63% 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 Levinstein Properties' P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Levinstein Properties currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. 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. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Levinstein Properties (of which 2 shouldn't be ignored!) you should know about.

Of course, you might also be able to find a better stock than Levinstein Properties. 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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