Succeed co.,ltd.'s (TSE:9256) Stock Retreats 27% But Earnings Haven't Escaped The Attention Of Investors

The Succeed co.,ltd. (TSE:9256) share price has softened a substantial 27% over the previous 30 days, handing back much of the gains the stock has made lately. The last month has meant the stock is now only up 7.8% during the last year.

Although its price has dipped substantially, it's still not a stretch to say that Succeedltd's price-to-earnings (or "P/E") ratio of 13.9x right now seems quite "middle-of-the-road" compared to the market in Japan, where the median P/E ratio is around 14x. 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.

For example, consider that Succeedltd's financial performance has been poor lately as its earnings have been in decline. It might be that many expect the company to put the disappointing earnings performance behind them over the coming period, which has kept the P/E from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

View our latest analysis for Succeedltd

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Succeedltd will help you shine a light on its historical performance.

How Is Succeedltd's Growth Trending?

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

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 4.9%. That put a dampener on the good run it was having over the longer-term as its three-year EPS growth is still a noteworthy 29% in total. So we can start by confirming that the company has generally done a good job of growing earnings over that time, even though it had some hiccups along the way.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 11% shows it's about the same on an annualised basis.

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

The Final Word

With its share price falling into a hole, the P/E for Succeedltd looks quite average now. 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.

As we suspected, our examination of Succeedltd revealed its three-year earnings trends are contributing to its P/E, given they look similar to current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Before you take the next step, you should know about the 2 warning signs for Succeedltd (1 shouldn't be ignored!) that we have uncovered.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.