Senshu Electric Co.,Ltd. (TSE:9824) Stocks Shoot Up 28% But Its P/E Still Looks Reasonable

Senshu Electric Co.,Ltd. (TSE:9824) shares have continued their recent momentum with a 28% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 54% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Senshu ElectricLtd's price-to-earnings (or "P/E") ratio of 13.7x is worth a mention when the median P/E in Japan is similar at about 15x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Senshu ElectricLtd certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Senshu ElectricLtd

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

Is There Some Growth For Senshu ElectricLtd?

In order to justify its P/E ratio, Senshu ElectricLtd would need to produce growth that's similar to the market.

Retrospectively, the last year delivered a decent 14% gain to the company's bottom line. This was backed up an excellent period prior to see EPS up by 200% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the one analyst covering the company suggest earnings should grow by 8.6% each year over the next three years. That's shaping up to be similar to the 10% per year growth forecast for the broader market.

With this information, we can see why Senshu ElectricLtd is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Senshu ElectricLtd's P/E?

Senshu ElectricLtd's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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 Senshu ElectricLtd maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Senshu ElectricLtd with six simple checks will allow you to discover any risks that could be an issue.

You might be able to find a better investment than Senshu ElectricLtd. 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.