Orian Sh.M. Ltd.’s (TLV:ORIN) Business Is Trailing The Market But Its Shares Aren’t

Orian S.A.E. Ltd (TLV: ORIN) a price-to-earnings (or “P/E”) ratio of 14.6x might make it look like a strong sell right now compared to the market in Israel, where about half of companies have P/E ratios of less than 9x and even P/E. E less than 5x are very common. However, the P/E may be too high for some reason and requires further investigation to determine if it is justified.

Recent times have been very beneficial for Orian Sh.M as its profits have gone up very quickly. It seems that many are expecting the strong earnings performance to outperform most other companies during the coming period, which has increased investors’ willingness to pay for the shares. If not, existing shareholders may be a little concerned about the viability of the share price.

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Our analysis indicates that ORIN is probably overrated!

TASE: ORIN price based on previous earnings November 25, 2022

Although there are no analyst estimates available for Orian Sh.M, take a look at this Free Data-rich visualization of how a company stacks up on profits, revenues, and cash flows.

What growth metrics tell us about a high P/E?

There is an inherent assumption that a company must significantly outperform the market for P/E ratios such as Orian S.M. to be considered reasonable.

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Looking back first, we see that the company grew earnings per share by 104% last year. However, EPS has barely increased at all from where it was three years ago in total, which isn’t ideal. Accordingly, shareholders may not have been overly satisfied with the unstable growth rates over the medium term.

Balancing its recent medium-term earnings trajectory against the broader market’s one-year expectation of an 18% expansion appears to be significantly less attractive year-over-year.

In light of this, it’s troubling that Orian Sh.M’s P/E is outperforming the majority of other companies. Most investors seem to ignore recent relatively limited growth rates and hope for a turnaround in the company’s business prospects. There is a good chance for existing shareholders to be setting themselves up for future disappointment if P/E falls to levels more in line with recent growth rates.

The bottom line on Orian Sh.M.’s P/E

While the price-to-earnings ratio shouldn’t be the determining factor in whether or not to buy a stock, it is a good gauge of earnings expectations.

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We have established that Orian Sh.M is currently trading at a much higher multiple of earnings than expected given its recent growth over three years is below broader market expectations. When we see weak earnings with slower-than-market growth, we suspect that the stock price is at risk of falling, leading to a lower high P/E. Unless recent medium-term conditions have improved significantly, it is very difficult to accept these prices as reasonable.

In addition, you should also learn about these Two warning signs we spotted with Orian Sh.M (including 1 which makes us a little uncomfortable).

It is important to Make sure you’re looking for great company, not just the first idea you come across. So take a peek at this Free A list of interesting companies that have had strong earnings growth recently (and a P/E ratio of less than 20x).

Evaluation is complex, but we help make it simple.

Find out if Orian S.A.E potentially overvalued or undervalued by checking our comprehensive analysis, which includes Fair value estimates, risks and warnings, dividends, insider transactions and financial soundness.

View the free analysis

This article written by Simply Wall St is general in nature. We provide comments based on historical data and analyst predictions only using an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock, and it does not take into account your objectives or financial situation. We aim to provide you with focused, long-term analysis driven by fundamental data. Note that our analysis may not include the company’s most recent price-sensitive announcements or specific materials. Wall Street simply has no position in any of the stocks mentioned.

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