Slammed 42% Playtika Holding Corp. (NASDAQ:PLTK) Screens Well Here But There Might Be A Catch

The Playtika Holding Corp. (NASDAQ:PLTK) share price has fared very poorly over the last month, falling by a substantial 42%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 41% in that time.

Following the heavy fall in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 18x, you may consider Playtika Holding as an attractive investment with its 9.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Playtika Holding hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Check out our latest analysis for Playtika Holding

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Is There Any Growth For Playtika Holding?

The only time you'd be truly comfortable seeing a P/E as low as Playtika Holding's is when the company's growth is on track to lag the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 32%. As a result, earnings from three years ago have also fallen 43% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 17% per annum as estimated by the twelve analysts watching the company. With the market only predicted to deliver 11% each year, the company is positioned for a stronger earnings result.

In light of this, it's peculiar that Playtika Holding's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Playtika Holding's P/E

Playtika Holding's P/E has taken a tumble along with its share price. 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.

We've established that Playtika Holding currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 5 warning signs for Playtika Holding that you should be aware of.

If you're unsure about the strength of Playtika Holding's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.