Ezdan Holding Group Q.P.S.C. (DSM:ERES) Not Flying Under The Radar

With a price-to-earnings (or "P/E") ratio of 60.2x Ezdan Holding Group Q.P.S.C. (DSM:ERES) may be sending very bearish signals at the moment, given that almost half of all companies in Qatar have P/E ratios under 12x and even P/E's lower than 10x 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 so lofty.

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Ezdan Holding Group Q.P.S.C certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Ezdan Holding Group Q.P.S.C

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Ezdan Holding Group Q.P.S.C will help you shine a light on its historical performance.

How Is Ezdan Holding Group Q.P.S.C's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Ezdan Holding Group Q.P.S.C's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 480% gain to the company's bottom line. Pleasingly, EPS has also lifted 228% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

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

In light of this, it's understandable that Ezdan Holding Group Q.P.S.C's P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Bottom Line On Ezdan Holding Group Q.P.S.C's P/E

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.

As we suspected, our examination of Ezdan Holding Group Q.P.S.C revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Ezdan Holding Group Q.P.S.C (1 is significant!) that you should be aware of.

If you're unsure about the strength of Ezdan Holding Group Q.P.S.C'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.