The Company for Cooperative Insurance's (TADAWUL:8010) Earnings Are Not Doing Enough For Some Investors

With a price-to-earnings (or "P/E") ratio of 24.9x The Company for Cooperative Insurance (TADAWUL:8010) may be sending bullish signals at the moment, given that almost half of all companies in Saudi Arabia have P/E ratios greater than 30x and even P/E's higher than 61x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Company for Cooperative Insurance has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 Company for Cooperative Insurance

Want the full picture on analyst estimates for the company? Then our free report on Company for Cooperative Insurance will help you uncover what's on the horizon.

Does Growth Match The Low P/E?

Company for Cooperative Insurance's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 20% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to climb by 19% per annum during the coming three years according to the three analysts following the company. With the market predicted to deliver 21% growth per year, the company is positioned for a weaker earnings result.

In light of this, it's understandable that Company for Cooperative Insurance'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 Key Takeaway

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.

As we suspected, our examination of Company for Cooperative Insurance'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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Company for Cooperative Insurance with six simple checks.

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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