Even With A 25% Surge, Cautious Investors Are Not Rewarding G. Willi-Food International Ltd.'s (NASDAQ:WILC) Performance Completely

Despite an already strong run, G. Willi-Food International Ltd. (NASDAQ:WILC) shares have been powering on, with a gain of 25% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 69% in the last year.

Even after such a large jump in price, G. Willi-Food International may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 12.9x, since almost half of all companies in the United States have P/E ratios greater than 19x and even P/E's higher than 34x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

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Recent times have been quite advantageous for G. Willi-Food International as its earnings have been rising very briskly. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for G. Willi-Food International

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 G. Willi-Food International's earnings, revenue and cash flow.

Is There Any Growth For G. Willi-Food International?

The only time you'd be truly comfortable seeing a P/E as low as G. Willi-Food International's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 65% gain to the company's bottom line. Pleasingly, EPS has also lifted 202% 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 16% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that G. Willi-Food International is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What We Can Learn From G. Willi-Food International's P/E?

G. Willi-Food International's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that G. Willi-Food International currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Having said that, be aware G. Willi-Food International is showing 1 warning sign in our investment analysis, you should know about.

Of course, you might also be able to find a better stock than G. Willi-Food International. 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.