MINEBEA MITSUMI Inc.'s (TSE:6479) Price In Tune With Earnings

When close to half the companies in Japan have price-to-earnings ratios (or "P/E's") below 14x, you may consider MINEBEA MITSUMI Inc. (TSE:6479) as a stock to potentially avoid with its 20.5x P/E ratio. 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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With earnings growth that's inferior to most other companies of late, MINEBEA MITSUMI has been relatively sluggish. One possibility is that the P/E is high because investors think this lacklustre earnings performance will improve markedly. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for MINEBEA MITSUMI

Keen to find out how analysts think MINEBEA MITSUMI's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Growth For MINEBEA MITSUMI?

MINEBEA MITSUMI's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Retrospectively, the last year delivered a decent 3.2% gain to the company's bottom line. Still, lamentably EPS has fallen 2.8% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 14% each year as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 9.1% per annum, which is noticeably less attractive.

With this information, we can see why MINEBEA MITSUMI 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 Final Word

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.

As we suspected, our examination of MINEBEA MITSUMI's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for MINEBEA MITSUMI with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on MINEBEA MITSUMI, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.