Tsuburaya Fields Holdings Inc. (TSE:2767) Not Doing Enough For Some Investors As Its Shares Slump 33%

Tsuburaya Fields Holdings Inc. (TSE:2767) shareholders that were waiting for something to happen have been dealt a blow with a 33% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 65% loss during that time.

In spite of the heavy fall in price, Tsuburaya Fields Holdings may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 6x, since almost half of all companies in Japan have P/E ratios greater than 14x and even P/E's higher than 21x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Tsuburaya Fields Holdings certainly has been doing a good job lately as it's been growing earnings more than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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.

View our latest analysis for Tsuburaya Fields Holdings

Want the full picture on analyst estimates for the company? Then our free report on Tsuburaya Fields Holdings will help you uncover what's on the horizon.

Is There Any Growth For Tsuburaya Fields Holdings?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Tsuburaya Fields Holdings' to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 39%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the one analyst covering the company suggest earnings should grow by 5.9% each year over the next three years. That's shaping up to be materially lower than the 9.6% each year growth forecast for the broader market.

With this information, we can see why Tsuburaya Fields Holdings is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Tsuburaya Fields Holdings' P/E

Tsuburaya Fields Holdings' P/E looks about as weak as its stock price lately. 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 Tsuburaya Fields Holdings' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Tsuburaya Fields Holdings is showing 3 warning signs in our investment analysis, and 2 of those can't be ignored.

If these risks are making you reconsider your opinion on Tsuburaya Fields Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.

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