Stock Analysis

Mobile Telecommunications Company Saudi Arabia's (TADAWUL:7030) Prospects Need A Boost To Lift Shares

SASE:7030
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Mobile Telecommunications Company Saudi Arabia's (TADAWUL:7030) price-to-earnings (or "P/E") ratio of 10.7x might make it look like a strong buy right now compared to the market in Saudi Arabia, where around half of the companies have P/E ratios above 25x and even P/E's above 39x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Mobile Telecommunications Company Saudi Arabia certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Mobile Telecommunications Company Saudi Arabia

pe-multiple-vs-industry
SASE:7030 Price to Earnings Ratio vs Industry January 3rd 2024
Keen to find out how analysts think Mobile Telecommunications Company Saudi Arabia's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Mobile Telecommunications Company Saudi Arabia's Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Mobile Telecommunications Company Saudi Arabia's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 229% last year. Pleasingly, EPS has also lifted 180% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to slump, contracting by 13% per annum during the coming three years according to the six analysts following the company. Meanwhile, the broader market is forecast to expand by 16% each year, which paints a poor picture.

In light of this, it's understandable that Mobile Telecommunications Company Saudi Arabia's P/E would sit below the majority of other companies. However, shrinking earnings are unlikely to lead to a stable P/E over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

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.

As we suspected, our examination of Mobile Telecommunications Company Saudi Arabia's analyst forecasts revealed that its outlook for shrinking earnings 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 4 warning signs for Mobile Telecommunications Company Saudi Arabia (2 are potentially serious!) that you should be aware of.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.