Earnings Tell The Story For ONE CAREER Inc. (TSE:4377) As Its Stock Soars 26%

ONE CAREER Inc. (TSE:4377) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 46% in the last year.

After such a large jump in price, given close to half the companies in Japan have price-to-earnings ratios (or "P/E's") below 13x, you may consider ONE CAREER as a stock to avoid entirely with its 33.5x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

ONE CAREER certainly has been doing a good job lately as it's been growing earnings more than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for ONE CAREER

Want the full picture on analyst estimates for the company? Then our free report on ONE CAREER will help you uncover what's on the horizon.

Is There Enough Growth For ONE CAREER?

There's an inherent assumption that a company should far outperform the market for P/E ratios like ONE CAREER's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 52% last year. The strong recent performance means it was also able to grow EPS by 195% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 36% per year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 10% per year, which is noticeably less attractive.

With this information, we can see why ONE CAREER is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From ONE CAREER's P/E?

Shares in ONE CAREER have built up some good momentum lately, which has really inflated its P/E. 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 ONE CAREER maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware ONE CAREER is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of ONE CAREER's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.