While nearly half of the companies in Saudi Arabia have a price-to-earnings ratio (P/E) of less than 24x, Saudi Research and Media Group (TADAWUL:4210), at 54.2x, could be considered a stock to avoid completely. Masu. P.E.R. However, there may be a reason why the P/E ratio is so high, and further research is needed to determine if it’s justified.
Although the market has seen an increase in profits recently, Saudi Research and Media Group’s profits are in reverse, which is not very good. One possibility is that the P/E ratio is high because investors believe this poor performance will be a turning point. If not, existing shareholders could become extremely nervous about the viability of the stock price.
See the latest analysis from Saudi Investigative Media Group.
SASE:4210 Price/Earnings Ratio vs. Industry October 6, 2024 Want to know how analysts think Saudi Research and Media Group’s future compares to its industry? , a free report is a great place to start.
What are the growth trends of Saudi Investigative Media Group?
There is an inherent assumption that for a P/E ratio like Saudi Research and Media Group’s to be considered reasonable, a company needs to achieve a P/E ratio well above the market.
Looking back at last year’s earnings, we unfortunately saw the company’s profit drop by 37%. In any case, the growth in the previous quarter allowed EPS to rise by a total of 28% compared to three years ago. So we can start by confirming that, despite some hiccups along the way, the company has generally been able to grow its earnings steadily over that period.
Looking ahead, the only analyst that follows the company says that EPS is expected to grow 33% annually over the next three years. Meanwhile, the rest of the market is expected to grow by only 16% annually, making it significantly less attractive.
This information helps explain why Saudi Research & Media Group is trading at a very high P/E compared to the market. Most investors expect this strong future growth and seem willing to pay more for the stock.
What can we learn from Saudi Research & Media Group’s P/E ratio?
Generally, we like to limit our use of price-to-earnings ratios to establishing what the market thinks about a company’s overall health.
As expected, we found that Saudi Research and Media Group maintains a high P/E ratio on the strength of its higher growth forecast than the overall market. At this stage, investors feel that the potential for earnings deterioration is not large enough to justify a lower P/E ratio. Under these circumstances, it is unlikely that stock prices will fall significantly in the near future.
You should always think about risk. Case in point: Saudi Investigative Media Group has spotted 1 warning sign you should know about.
Of course, you might find better stocks than Saudi Research and Media Group. So we recommend taking a look at this free collection of other companies that have reasonable P/E ratios and are growing earnings strongly.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
