Fewer Investors Than Expected Jumping On Mobile Telecommunications Company Saudi Arabia (TADAWUL:7030)

When close to half the companies in Saudi Arabia have price-to-earnings ratios (or "P/E's") above 22x, you may consider Mobile Telecommunications Company Saudi Arabia (TADAWUL:7030) as an attractive investment with its 16.3x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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With earnings growth that's superior to most other companies of late, Mobile Telecommunications Company Saudi Arabia 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Mobile Telecommunications Company Saudi Arabia

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

In order to justify its P/E ratio, Mobile Telecommunications Company Saudi Arabia would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 217% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 145% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 11% each year as estimated by the eight analysts watching the company. That's shaping up to be similar to the 13% each year growth forecast for the broader market.

With this information, we find it odd that Mobile Telecommunications Company Saudi Arabia is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Mobile Telecommunications Company Saudi Arabia's P/E

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.

We've established that Mobile Telecommunications Company Saudi Arabia currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

It is also worth noting that we have found 1 warning sign for Mobile Telecommunications Company Saudi Arabia that you need to take into consideration.

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.