When close to half the companies in Israel have price-to-earnings ratios (or “P/E’s”) above 12x, you may consider Maman-Cargo Terminals & Handling Ltd. (TLV:MMAN) as an attractive investment with its 8.2x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it’s justified.
With earnings growth that’s exceedingly strong of late, Maman-Cargo Terminals & Handling has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn’t eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Check out our latest analysis for Maman-Cargo Terminals & Handling
We don’t have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Maman-Cargo Terminals & Handling’s earnings, revenue and cash flow.
How Is Maman-Cargo Terminals & Handling’s Growth Trending?
Maman-Cargo Terminals & Handling’s P/E ratio would be typical for a company that’s only expected to deliver limited growth, and importantly, perform worse than the market.
Taking a look back first, we see that the company grew earnings per share by an impressive 54% last year. Despite this strong recent growth, it’s still struggling to catch up as its three-year EPS frustratingly shrank by 25% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.
Comparing that to the market, which is predicted to deliver 0.6% growth in the next 12 months, the company’s downward momentum based on recent medium-term earnings results is a sobering picture.
In light of this, it’s understandable that Maman-Cargo Terminals & Handling’s P/E would sit below the majority of other companies. However, we think shrinking earnings are unlikely to lead to a stable P/E over the longer term, which could set up shareholders for future disappointment. There’s potential for the P/E to fall to even lower levels if the company doesn’t improve its profitability.
The Bottom Line On Maman-Cargo Terminals & Handling’s P/E
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 Maman-Cargo Terminals & Handling maintains its low P/E on the weakness of its sliding earnings over the medium-term, as expected. At this stage investors feel the potential for an improvement in earnings isn’t great enough to justify a higher P/E ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
Before you take the next step, you should know about the 5 warning signs for Maman-Cargo Terminals & Handling (2 are significant!) that we have uncovered.
If you’re unsure about the strength of Maman-Cargo Terminals & Handling’s business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Promoted
If you decide to trade Maman-Cargo Terminals & Handling, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected].
Recent Comments