Further Upside For MOBI Industry Co. (TADAWUL:9517) Shares Could Introduce Price Risks After 26% Bounce

MOBI Industry Co. (TADAWUL:9517) shares have continued their recent momentum with a 26% gain in the last month alone. The last month tops off a massive increase of 111% in the last year.

Even after such a large jump in price, MOBI Industry may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 21.5x, since almost half of all companies in Saudi Arabia have P/E ratios greater than 26x and even P/E's higher than 43x 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 limited.

With earnings growth that's exceedingly strong of late, MOBI Industry has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for MOBI Industry

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 MOBI Industry's earnings, revenue and cash flow.

How Is MOBI Industry's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as MOBI Industry's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 56% gain to the company's bottom line. Pleasingly, EPS has also lifted 86% 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 19% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that MOBI Industry is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

MOBI Industry's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that MOBI Industry currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. 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. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for MOBI Industry that 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.