Stock Analysis

Little Excitement Around Bindawood Holding's (TADAWUL:4161) Earnings

SASE:4161
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When close to half the companies in Saudi Arabia have price-to-earnings ratios (or "P/E's") above 29x, you may consider Bindawood Holding (TADAWUL:4161) as an attractive investment with its 24.2x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times have been advantageous for Bindawood Holding as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Bindawood Holding

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SASE:4161 Price Based on Past Earnings March 18th 2021
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bindawood Holding.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Bindawood Holding would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 24%. As a result, it also grew EPS by 19% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Shifting to the future, estimates from the six analysts covering the company suggest earnings should grow by 7.1% per year over the next three years. Meanwhile, the rest of the market is forecast to expand by 13% per annum, which is noticeably more attractive.

In light of this, it's understandable that Bindawood Holding's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Bindawood Holding's P/E

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Bindawood Holding's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Bindawood Holding you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a P/E ratio below 20x).

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Valuation is complex, but we're helping make it simple.

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This article by Simply Wall St is general in nature. 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.
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