What we can learn from Aura Investments Ltd.’s (TLV:AURA) P/E ratio

The price/earnings ratio (P/E) is 20.3 times. Aura Investments Co., Ltd. Considering that almost half of Israeli companies have a P/E ratio below 11, and P/Es below 7 are not uncommon, (TLV:AURA) may be sending out a very bearish signal at the moment, however there may be a reason why the P/E is quite high and further investigation is needed to determine if it is justified.

Aura Investments has certainly been performing well recently, growing its earnings very rapidly. It seems that many expect the company’s strong earnings performance to outperform most other companies in the coming period. As such, investors are more willing to pay a premium for the company’s shares. If this isn’t the case, existing shareholders may be a bit nervous about the viability of the stock.

View our latest analysis for Aura Investments

Analyst forecasts for Aura Investments are not available, but you can find them here. free Data-rich visualizations give you insight into a company’s revenue, income, and cash flow situation.

Is growth justifying the high P/E?

For Aura Investments to justify its P/E ratio, it would need to achieve significant growth that significantly outpaces the market.

Looking at revenue growth over the last year, the company recorded an impressive 46% increase. Over the last three years, EPS has grown by an impressive 176% overall, buoyed by short-term performance, so shareholders have likely welcomed these medium-term revenue growth rates.

This contrasts with the rest of the market, which is expected to grow by 11% over the next 12 months, and is significantly lower than the company’s recent medium-term annual growth rates.

This information explains why Aura Investments is trading at such a high P/E relative to the market – perhaps shareholders are not keen to part with what they believe will continue to outperform the stock exchange.

What can we learn from Aura Investments’ P/E?

Generally, we like to limit the use of price-to-earnings ratios to revealing what the market thinks about the overall health of a company.

As expected, Aura Investments’ research reveals that the company’s three-year earnings trend is better than current market expectations, contributing to the high P/E. Currently, shareholders are comfortable with the P/E as they are confident that earnings are not under threat. If recent medium-term earnings trends continue, it is unlikely that the share price will fall significantly in the near future under these circumstances.

Before proceeding to the next step, 3 warning signs for Aura Investments (Two is important!) We discovered.

of course, By considering a few good candidates, you may find a great investment. Take a look at this free A list of companies trading at low P/Es and with strong growth track records.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

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