WILLTEC Co.,Ltd. (TSE:7087) Stock Rockets 54% But Many Are Still Ignoring The Company

WILLTEC Co.,Ltd. (TSE:7087) shareholders have had their patience rewarded with a 54% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 57%.

Even after such a large jump in price, given about half the companies in Japan have price-to-earnings ratios (or "P/E's") above 15x, you may still consider WILLTECLtd as an attractive investment with its 11x 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 limited.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

With earnings growth that's exceedingly strong of late, WILLTECLtd has been doing very well. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. 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.

See our latest analysis for WILLTECLtd

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 WILLTECLtd's earnings, revenue and cash flow.

Is There Any Growth For WILLTECLtd?

The only time you'd be truly comfortable seeing a P/E as low as WILLTECLtd's is when the company's growth is on track to lag the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 44% last year. The latest three year period has also seen an excellent 163% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 11% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's peculiar that WILLTECLtd'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.

The Bottom Line On WILLTECLtd's P/E

WILLTECLtd's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of WILLTECLtd revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. There could be some major unobserved threats to earnings preventing the P/E ratio from matching this positive performance. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with WILLTECLtd (at least 1 which is potentially serious), and understanding them should be part of your investment process.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.