Investors Still Waiting For A Pull Back In Japan Elevator Service Holdings Co.,Ltd. (TSE:6544)

When close to half the companies in Japan have price-to-earnings ratios (or "P/E's") below 13x, you may consider Japan Elevator Service Holdings Co.,Ltd. (TSE:6544) as a stock to avoid entirely with its 50.5x 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.

Recent times have been advantageous for Japan Elevator Service HoldingsLtd as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Japan Elevator Service HoldingsLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Japan Elevator Service HoldingsLtd.

Is There Enough Growth For Japan Elevator Service HoldingsLtd?

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

If we review the last year of earnings growth, the company posted a terrific increase of 50%. Pleasingly, EPS has also lifted 103% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 24% each year as estimated by the six analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 9.8% per year, which is noticeably less attractive.

In light of this, it's understandable that Japan Elevator Service HoldingsLtd's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Japan Elevator Service HoldingsLtd's P/E?

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Japan Elevator Service HoldingsLtd's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Japan Elevator Service HoldingsLtd.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.