Bupa Arabia for Cooperative Insurance Company (TADAWUL:8210) Not Lagging Market On Growth Or Pricing

It's not a stretch to say that Bupa Arabia for Cooperative Insurance Company's (TADAWUL:8210) price-to-earnings (or "P/E") ratio of 22.6x right now seems quite "middle-of-the-road" compared to the market in Saudi Arabia, where the median P/E ratio is around 21x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Bupa Arabia for Cooperative Insurance could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. One possibility is that the P/E is moderate because investors think this poor earnings performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for Bupa Arabia for Cooperative Insurance

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Does Growth Match The P/E?

The only time you'd be comfortable seeing a P/E like Bupa Arabia for Cooperative Insurance's is when the company's growth is tracking the market closely.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 6.3%. Even so, admirably EPS has lifted 116% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Turning to the outlook, the next three years should generate growth of 13% per year as estimated by the three analysts watching the company. That's shaping up to be similar to the 12% each year growth forecast for the broader market.

In light of this, it's understandable that Bupa Arabia for Cooperative Insurance's P/E sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Key Takeaway

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Bupa Arabia for Cooperative Insurance maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. Unless these conditions change, they will continue to support the share price at these levels.

You always need to take note of risks, for example - Bupa Arabia for Cooperative Insurance has 1 warning sign we think you should be aware of.

Of course, you might also be able to find a better stock than Bupa Arabia for Cooperative Insurance. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.