Unpleasant Surprises Could Be In Store For Bezeq The Israel Telecommunication Corp. Ltd's (TLV:BEZQ) Shares

With a median price-to-earnings (or "P/E") ratio of close to 15x in Israel, you could be forgiven for feeling indifferent about Bezeq The Israel Telecommunication Corp. Ltd's (TLV:BEZQ) P/E ratio of 15x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Bezeq The Israel Telecommunication could be doing better as it's been growing earnings less than most other companies lately. One possibility is that the P/E is moderate because investors think this lacklustre earnings performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

Check out our latest analysis for Bezeq The Israel Telecommunication

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bezeq The Israel Telecommunication.

How Is Bezeq The Israel Telecommunication's Growth Trending?

Bezeq The Israel Telecommunication's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

If we review the last year of earnings growth, the company posted a worthy increase of 4.6%. Still, lamentably EPS has fallen 4.4% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 5.9% per annum during the coming three years according to the three analysts following the company. That's shaping up to be materially lower than the 14% each year growth forecast for the broader market.

With this information, we find it interesting that Bezeq The Israel Telecommunication is trading at a fairly similar P/E to the market. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of earnings growth is likely to weigh down the shares eventually.

The Final Word

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.

Our examination of Bezeq The Israel Telecommunication's analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. Right now we are uncomfortable with the P/E as the predicted future earnings aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

You should always think about risks. Case in point, we've spotted 2 warning signs for Bezeq The Israel Telecommunication you should be aware of.

If you're unsure about the strength of Bezeq The Israel Telecommunication's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.