Why Investors Shouldn't Be Surprised By Dr. Soliman Abdel Kader Fakeeh Hospital Company's (TADAWUL:4017) 26% Share Price Surge

Dr. Soliman Abdel Kader Fakeeh Hospital Company (TADAWUL:4017) shareholders have had their patience rewarded with a 26% share price jump in the last month. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Following the firm bounce in price, Dr. Soliman Abdel Kader Fakeeh Hospital may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 57.2x, since almost half of all companies in Saudi Arabia have P/E ratios under 23x and even P/E's lower than 15x 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.

While the market has experienced earnings growth lately, Dr. Soliman Abdel Kader Fakeeh Hospital's earnings have gone into reverse gear, which is not great. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Check out our latest analysis for Dr. Soliman Abdel Kader Fakeeh Hospital

Keen to find out how analysts think Dr. Soliman Abdel Kader Fakeeh Hospital's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Dr. Soliman Abdel Kader Fakeeh Hospital's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as Dr. Soliman Abdel Kader Fakeeh Hospital's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 12%. The last three years don't look nice either as the company has shrunk EPS by 63% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the six analysts covering the company suggest earnings should grow by 17% per year over the next three years. That's shaping up to be materially higher than the 15% per year growth forecast for the broader market.

In light of this, it's understandable that Dr. Soliman Abdel Kader Fakeeh Hospital's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Dr. Soliman Abdel Kader Fakeeh Hospital's P/E

Dr. Soliman Abdel Kader Fakeeh Hospital's P/E is flying high just like its stock has during the last month. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Dr. Soliman Abdel Kader Fakeeh Hospital maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Dr. Soliman Abdel Kader Fakeeh Hospital with six simple checks.

If these risks are making you reconsider your opinion on Dr. Soliman Abdel Kader Fakeeh Hospital, 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.