YAMADA Consulting Group Co.,Ltd. (TSE:4792) Stock Rockets 27% But Many Are Still Ignoring The Company

YAMADA Consulting Group Co.,Ltd. (TSE:4792) shareholders have had their patience rewarded with a 27% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 44% in the last year.

Even after such a large jump in price, there still wouldn't be many who think YAMADA Consulting GroupLtd's price-to-earnings (or "P/E") ratio of 11.8x is worth a mention when the median P/E in Japan is similar at about 14x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been quite advantageous for YAMADA Consulting GroupLtd as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

See our latest analysis for YAMADA Consulting GroupLtd

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 YAMADA Consulting GroupLtd's earnings, revenue and cash flow.

Does Growth Match The P/E?

The only time you'd be comfortable seeing a P/E like YAMADA Consulting GroupLtd's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered an exceptional 73% gain to the company's bottom line. Pleasingly, EPS has also lifted 147% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 10% shows it's noticeably more attractive on an annualised basis.

With this information, we find it interesting that YAMADA Consulting GroupLtd is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From YAMADA Consulting GroupLtd's P/E?

YAMADA Consulting GroupLtd appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that YAMADA Consulting GroupLtd currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears some are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with YAMADA Consulting GroupLtd.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.