Cocorport, Inc. (TSE:9346) Soars 25% But It's A Story Of Risk Vs Reward

Cocorport, Inc. (TSE:9346) shares have continued their recent momentum with a 25% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 32%.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Cocorport's P/E ratio of 13.3x, since the median price-to-earnings (or "P/E") ratio in Japan is also close to 15x. 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.

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Earnings have risen at a steady rate over the last year for Cocorport, which is generally not a bad outcome. It might be that many expect the respectable earnings performance to only match most other companies over the coming period, which has kept the P/E from rising. 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 not quite in favour.

See our latest analysis for Cocorport

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 Cocorport's earnings, revenue and cash flow.

Is There Some Growth For Cocorport?

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

If we review the last year of earnings growth, the company posted a worthy increase of 5.4%. Pleasingly, EPS has also lifted 90% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

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 curious that Cocorport's P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Cocorport's P/E?

Its shares have lifted substantially and now Cocorport's P/E is also back up to the market median. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Cocorport revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Cocorport that you need to be mindful of.

If you're unsure about the strength of Cocorport'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.