Bupa Arabia for Cooperative Insurance Company's (TADAWUL:8210) P/E Is On The Mark

With a price-to-earnings (or "P/E") ratio of 30.4x Bupa Arabia for Cooperative Insurance Company (TADAWUL:8210) may be sending bearish signals at the moment, given that almost half of all companies in Saudi Arabia have P/E ratios under 24x and even P/E's lower than 16x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

With earnings growth that's superior to most other companies of late, Bupa Arabia for Cooperative Insurance has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Bupa Arabia for Cooperative Insurance

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bupa Arabia for Cooperative Insurance.

What Are Growth Metrics Telling Us About The High P/E?

There's an inherent assumption that a company should outperform the market for P/E ratios like Bupa Arabia for Cooperative Insurance's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 53% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 42% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 32% during the coming year according to the three analysts following the company. That's shaping up to be materially higher than the 15% growth forecast for the broader market.

With this information, we can see why Bupa Arabia for Cooperative Insurance is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Bupa Arabia for Cooperative Insurance's P/E

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.

As we suspected, our examination of Bupa Arabia for Cooperative Insurance's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. 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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Bupa Arabia for Cooperative Insurance with six simple checks on some of these key factors.

You might be able to find a better investment than Bupa Arabia for Cooperative Insurance. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.