There won’t be many people thinking Clal Insurance Projects Holding Company Limited (TLV:CLIS)’s price-to-sales (or “P/S”) ratio of 0.2x is worth noting when the average P/S for the insurance industry in Israel is similar at around 0.3x. However, investors may ignore an obvious opportunity or potential setback if there is no rational basis for the price/earnings.
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How has Clal Insurance Enterprises Holdings performed recently?
Recent times have been very beneficial for Clal Insurance Enterprises Holdings as its revenues have been rising at a rapid pace. The market may be anticipating revenue performance to diminish in the future, preventing a higher P/E. Those who are bullish on Clal Insurance Enterprises Holdings will hope that is not the case, so they can buy the stock at a lower valuation.
Do you want the full picture of a company’s profits, revenues and cash flow? Then we have free The report on Clal Insurance Enterprises Holdings will help you shed light on its historical performance.
Is there some expected revenue growth for Clal Insurance Enterprises Holdings?
Clal Insurance Enterprises Holdings’ P/E ratio would be typical for a company that is only expected to deliver moderate growth and, more importantly, perform in line with the industry.
Retrospectively, last year produced an extraordinary 84% gain in the company’s net profits. The most recent three-year period also saw an excellent 72% overall rise in revenues, supported by its short-term performance. So we can start by emphasizing that the company did a great job growing revenues during that period.
In contrast to the company, the rest of the industry is expected to decline 13% over the next year, which puts the company’s recent positive medium-term growth rates in a good light at the moment.
With this information, we find it curious that Clal Insurance Enterprises Holdings is trading at a fairly similar P/E to the industry. Most investors seem unconvinced that the company can maintain its recent positive growth rate in the face of the broader industry downturn.
Key takeaways
Using the price-to-sales ratio alone to determine whether you should sell your shares is not sensible, however it can be a practical guide to a company’s future prospects.
As mentioned earlier, Clal Insurance Enterprises Holdings is currently trading on a P/E basis on par with the broader industry, but this is lower than expected given its recent revenue growth over three years is ahead of expectations for a struggling industry. When we see a history of positive growth in a struggling industry, but only an average P/E, we assume that potential risks are what might pressure the P/E ratio. One key risk is whether its revenue trajectory can continue to outperform under these difficult industry conditions. At least the risk of a price decline appears to be low, but investors seem to believe that future revenues could see some volatility.
Having said that, be aware Clal Insurance Enterprises Holdings is showing 3 warning signs In our investment analysis, you should know.
It is important to Make sure you’re looking for a great company, not just the first idea you come across. So, if increased profitability matches your idea of a great company, take a peek at this free A list of interesting companies with recent strong earnings growth (and a low P/E).
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Find out if Clal Insurance Enterprises Holdings may be overvalued or undervalued by reviewing our comprehensive analysis, which includes: Fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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This article written by Simply Wall St is general in nature. We provide comments based on historical data and analyst forecasts only using 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 into account your objectives or financial situation. We aim to offer you focused, long-term analysis driven by fundamental data. Note that our analysis may not take into account a company’s most recent price-sensitive announcements or qualitative materials. Simply put, Wall St has no position in any of the stocks mentioned.