East Pipes Integrated Company for Industry's (TADAWUL:1321) 25% Share Price Surge Not Quite Adding Up

Despite an already strong run, East Pipes Integrated Company for Industry (TADAWUL:1321) shares have been powering on, with a gain of 25% in the last thirty days. The annual gain comes to 189% following the latest surge, making investors sit up and take notice.

After such a large jump in price, given around half the companies in Saudi Arabia have price-to-earnings ratios (or "P/E's") below 27x, you may consider East Pipes Integrated Company for Industry as a stock to potentially avoid with its 41.1x P/E ratio. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

East Pipes Integrated Company for Industry certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It seems that many are expecting the strong earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for East Pipes Integrated Company for 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 East Pipes Integrated Company for Industry's earnings, revenue and cash flow.

How Is East Pipes Integrated Company for Industry's Growth Trending?

East Pipes Integrated Company for Industry's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 105%. Despite this strong recent growth, it's still struggling to catch up as its three-year EPS frustratingly shrank by 59% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

In contrast to the company, the rest of the market is expected to grow by 19% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

In light of this, it's alarming that East Pipes Integrated Company for Industry's P/E sits above the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.

The Bottom Line On East Pipes Integrated Company for Industry's P/E

East Pipes Integrated Company for Industry's P/E is getting right up there since its shares have risen strongly. 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.

Our examination of East Pipes Integrated Company for Industry revealed its shrinking earnings over the medium-term aren't impacting its high P/E anywhere near as much as we would have predicted, given the market is set to grow. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

We don't want to rain on the parade too much, but we did also find 3 warning signs for East Pipes Integrated Company for Industry (2 make us uncomfortable!) that you need to be mindful of.

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 low P/E).

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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.