Even With A 26% Surge, Cautious Investors Are Not Rewarding Unitronics (1989) (R"G) Ltd's (TLV:UNIT) Performance Completely

Unitronics (1989) (R"G) Ltd (TLV:UNIT) shareholders have had their patience rewarded with a 26% share price jump in the last month. The last month tops off a massive increase of 106% in the last year.

In spite of the firm bounce in price, it's still not a stretch to say that Unitronics (1989) (RG)'s price-to-earnings (or "P/E") ratio of 12.7x right now seems quite "middle-of-the-road" compared to the market in Israel, where the median P/E ratio is around 12x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's exceedingly strong of late, Unitronics (1989) (RG) has been doing very well. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for Unitronics (1989) (RG)

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 Unitronics (1989) (RG)'s earnings, revenue and cash flow.

How Is Unitronics (1989) (RG)'s Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like Unitronics (1989) (RG)'s to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 118%. The latest three year period has also seen an excellent 173% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 13% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it interesting that Unitronics (1989) (RG) is trading at a fairly similar P/E to the market. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Unitronics (1989) (RG)'s P/E

Unitronics (1989) (RG) appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Unitronics (1989) (RG) currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Unitronics (1989) (RG).

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.

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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.