Nasdaq
华尔街日报Pure Health Holding PJSC's (ADX:PUREHEALTH) P/E Is On The Mark
Pure Health Holding PJSC's (ADX:PUREHEALTH) price-to-earnings (or "P/E") ratio of 15.5x might make it look like a sell right now compared to the market in the United Arab Emirates, where around half of the companies have P/E ratios below 11x and even P/E's below 7x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.
With earnings growth that's superior to most other companies of late, Pure Health Holding PJSC has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.
View our latest analysis for Pure Health Holding PJSC
Is There Enough Growth For Pure Health Holding PJSC?
There's an inherent assumption that a company should outperform the market for P/E ratios like Pure Health Holding PJSC's to be considered reasonable.
Taking a look back first, we see that the company grew earnings per share by an impressive 59% last year. However, this wasn't enough as the latest three year period has seen a very unpleasant 57% drop in EPS in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 33% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 7.1% per year, which is noticeably less attractive.
With this information, we can see why Pure Health Holding PJSC is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Bottom Line On Pure Health Holding PJSC's P/E
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 Pure Health Holding PJSC maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Pure Health Holding PJSC with six simple checks.
You might be able to find a better investment than Pure Health Holding PJSC. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.