Analyst I.M.S. Investment Management Services Ltd (TLV:ANLT) Stocks Shoot Up 26% But Its P/E Still Looks Reasonable

Despite an already strong run, Analyst I.M.S. Investment Management Services Ltd (TLV:ANLT) shares have been powering on, with a gain of 26% in the last thirty days. The last month tops off a massive increase of 238% in the last year.

Since its price has surged higher, Analyst I.M.S. Investment Management Services' price-to-earnings (or "P/E") ratio of 19.8x might make it look like a sell right now compared to the market in Israel, where around half of the companies have P/E ratios below 15x and even P/E's below 11x are quite common. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

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Analyst I.M.S. Investment Management Services certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. The P/E is probably high because investors think this strong earnings growth will be enough to outperform the broader market in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for Analyst I.M.S. Investment Management Services

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Analyst I.M.S. Investment Management Services will help you shine a light on its historical performance.

What Are Growth Metrics Telling Us About The High P/E?

There's an inherent assumption that a company should outperform the market for P/E ratios like Analyst I.M.S. Investment Management Services' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 131% gain to the company's bottom line. Pleasingly, EPS has also lifted 10,598% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 23% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Analyst I.M.S. Investment Management Services' P/E sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From Analyst I.M.S. Investment Management Services' P/E?

Analyst I.M.S. Investment Management Services shares have received a push in the right direction, but its P/E is elevated too. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that Analyst I.M.S. Investment Management Services maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Analyst I.M.S. Investment Management Services that you need to be mindful of.

Of course, you might also be able to find a better stock than Analyst I.M.S. Investment Management Services. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 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.