Marubeni Corporation (TSE:8002) Looks Inexpensive After Falling 37% But Perhaps Not Attractive Enough

Marubeni Corporation (TSE:8002) shareholders that were waiting for something to happen have been dealt a blow with a 37% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 19% in that time.

In spite of the heavy fall in price, Marubeni's price-to-earnings (or "P/E") ratio of 6.9x might still make it look like a buy right now compared to the market in Japan, where around half of the companies have P/E ratios above 14x and even P/E's above 21x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

While the market has experienced earnings growth lately, Marubeni's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still 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.

View our latest analysis for Marubeni

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

How Is Marubeni's Growth Trending?

Marubeni's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. Although pleasingly EPS has lifted 79% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 5.4% per year as estimated by the ten analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 9.6% per annum, which is noticeably more attractive.

With this information, we can see why Marubeni is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

The softening of Marubeni's shares means its P/E is now sitting at a pretty low level. 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 Marubeni maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Marubeni that we have uncovered.

You might be able to find a better investment than Marubeni. 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.

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