Investors Appear Satisfied With Miyaji Engineering Group,Inc.'s (TSE:3431) Prospects As Shares Rocket 26%

Despite an already strong run, Miyaji Engineering Group,Inc. (TSE:3431) shares have been powering on, with a gain of 26% in the last thirty days. The last month tops off a massive increase of 132% in the last year.

Although its price has surged higher, it's still not a stretch to say that Miyaji Engineering GroupInc's price-to-earnings (or "P/E") ratio of 14.4x right now seems quite "middle-of-the-road" compared to the market in Japan, where the median P/E ratio is around 15x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Miyaji Engineering GroupInc has been doing a good job lately as it's been growing earnings at a solid pace. It might be that many expect the respectable earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

See our latest analysis for Miyaji Engineering GroupInc

Although there are no analyst estimates available for Miyaji Engineering GroupInc, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Growth For Miyaji Engineering GroupInc?

Miyaji Engineering GroupInc's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 21% last year. Pleasingly, EPS has also lifted 42% 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.

It's interesting to note that the rest of the market is similarly expected to grow by 11% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we can see why Miyaji Engineering GroupInc is trading at a fairly similar P/E to the market. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

What We Can Learn From Miyaji Engineering GroupInc's P/E?

Its shares have lifted substantially and now Miyaji Engineering GroupInc's P/E is also back up to the market median. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Miyaji Engineering GroupInc revealed its three-year earnings trends are contributing to its P/E, given they look similar to current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Plus, you should also learn about this 1 warning sign we've spotted with Miyaji Engineering GroupInc.

You might be able to find a better investment than Miyaji Engineering GroupInc. 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.