Ki-Star Real Estate Co.,Ltd (TSE:3465) Stock Catapults 29% Though Its Price And Business Still Lag The Market

Ki-Star Real Estate Co.,Ltd (TSE:3465) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 24% in the last twelve months.

In spite of the firm bounce in price, given about half the companies in Japan have price-to-earnings ratios (or "P/E's") above 14x, you may still consider Ki-Star Real EstateLtd as an attractive investment with its 9.5x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Ki-Star Real EstateLtd could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Ki-Star Real EstateLtd

Keen to find out how analysts think Ki-Star Real EstateLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Ki-Star Real EstateLtd's Growth Trending?

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

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 43%. The last three years don't look nice either as the company has shrunk EPS by 46% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 7.4% during the coming year according to the only analyst following the company. Meanwhile, the rest of the market is forecast to expand by 11%, which is noticeably more attractive.

In light of this, it's understandable that Ki-Star Real EstateLtd's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Ki-Star Real EstateLtd's P/E

Ki-Star Real EstateLtd's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Ki-Star Real EstateLtd's 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Ki-Star Real EstateLtd (1 doesn't sit too well with us!) that you need to be mindful of.

If these risks are making you reconsider your opinion on Ki-Star Real EstateLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.