Fitaihi Holding Group's (TADAWUL:4180) 25% Jump Shows Its Popularity With Investors

Fitaihi Holding Group (TADAWUL:4180) shareholders are no doubt pleased to see that the share price has bounced 25% in the last month, although it is still struggling to make up recently lost ground. Notwithstanding the latest gain, the annual share price return of 7.5% isn't as impressive.

After such a large jump in price, Fitaihi Holding Group's price-to-earnings (or "P/E") ratio of 36.4x might make it look like a sell right now compared to the market in Saudi Arabia, where around half of the companies have P/E ratios below 26x and even P/E's below 19x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

For instance, Fitaihi Holding Group's receding earnings in recent times would have to be some food for thought. 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.

View our latest analysis for Fitaihi Holding Group

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 Fitaihi Holding Group's earnings, revenue and cash flow.

Is There Enough Growth For Fitaihi Holding Group?

In order to justify its P/E ratio, Fitaihi Holding Group would need to produce impressive growth in excess of the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 68%. Still, the latest three year period has seen an excellent 343% overall rise in EPS, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 15% shows it's noticeably more attractive on an annualised basis.

With this information, we can see why Fitaihi Holding Group is trading at such a high P/E compared to the market. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Key Takeaway

The large bounce in Fitaihi Holding Group's shares has lifted the company's P/E to a fairly high level. 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 Fitaihi Holding Group maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for Fitaihi Holding Group you should be aware of.

If these risks are making you reconsider your opinion on Fitaihi Holding Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.