Stock Analysis

Investors Holding Back On Toyota Boshoku Corporation (TSE:3116)

TSE:3116
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When close to half the companies in Japan have price-to-earnings ratios (or "P/E's") above 14x, you may consider Toyota Boshoku Corporation (TSE:3116) as an attractive investment with its 8.6x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times haven't been advantageous for Toyota Boshoku as its earnings have been rising slower than most other companies. It seems that many are expecting the uninspiring earnings performance to persist, which has repressed the P/E. If you still like the company, you'd be hoping earnings don't get any worse and that you could pick up some stock while it's out of favour.

View our latest analysis for Toyota Boshoku

pe-multiple-vs-industry
TSE:3116 Price to Earnings Ratio vs Industry December 31st 2024
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Toyota Boshoku.

Is There Any Growth For Toyota Boshoku?

In order to justify its P/E ratio, Toyota Boshoku would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a decent 5.0% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen an unpleasant 16% overall drop in EPS. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 8.8% each year as estimated by the seven analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 11% per year, which is not materially different.

In light of this, it's peculiar that Toyota Boshoku's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Toyota Boshoku currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Toyota Boshoku that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Valuation is complex, but we're here to simplify it.

Discover if Toyota Boshoku might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.