Investors Holding Back On The National Shipping Company of Saudi Arabia (TADAWUL:4030)

With a price-to-earnings (or "P/E") ratio of 9.5x The National Shipping Company of Saudi Arabia (TADAWUL:4030) may be sending very bullish signals at the moment, given that almost half of all companies in Saudi Arabia have P/E ratios greater than 24x and even P/E's higher than 41x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

The earnings growth achieved at National Shipping Company of Saudi Arabia over the last year would be more than acceptable for most companies. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform 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 out of favour.

Check out our latest analysis for National Shipping Company of Saudi Arabia

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on National Shipping Company of Saudi Arabia will help you shine a light on its historical performance.

How Is National Shipping Company of Saudi Arabia's Growth Trending?

In order to justify its P/E ratio, National Shipping Company of Saudi Arabia would need to produce anemic growth that's substantially trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 17% last year. The latest three year period has also seen an excellent 1,078% 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 16% 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 peculiar that National Shipping Company of Saudi Arabia's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On National Shipping Company of Saudi Arabia'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.

Our examination of National Shipping Company of Saudi Arabia revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

You always need to take note of risks, for example - National Shipping Company of Saudi Arabia has 1 warning sign we think you should be aware of.

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.