The Market Lifts Marubeni Construction Material Lease Co.,Ltd. (TSE:9763) Shares 26% But It Can Do More

Marubeni Construction Material Lease Co.,Ltd. (TSE:9763) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 3.6% isn't as impressive.

Even after such a large jump in price, Marubeni Construction Material LeaseLtd may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 8.2x, since almost half of all companies in Japan have P/E ratios greater than 14x and even P/E's higher than 21x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

We've discovered 1 warning sign about Marubeni Construction Material LeaseLtd. View them for free.

Marubeni Construction Material LeaseLtd 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 degrade substantially, which has repressed the P/E. If you 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 Construction Material LeaseLtd

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Marubeni Construction Material LeaseLtd's earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The Low P/E?

In order to justify its P/E ratio, Marubeni Construction Material LeaseLtd would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 12% last year. This was backed up an excellent period prior to see EPS up by 61% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 9.7% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Marubeni Construction Material LeaseLtd's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Marubeni Construction Material LeaseLtd's P/E?

Marubeni Construction Material LeaseLtd's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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 Marubeni Construction Material LeaseLtd currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Marubeni Construction Material LeaseLtd that you should be aware of.

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