Ki-Star Real Estate Co.,Ltd's (TSE:3465) Subdued P/E Might Signal An Opportunity

When close to half the companies in Japan have price-to-earnings ratios (or "P/E's") above 13x, you may consider Ki-Star Real Estate Co.,Ltd (TSE:3465) as an attractive investment with its 9.1x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Recent times haven't been advantageous for Ki-Star Real EstateLtd as its earnings have been rising slower than most other companies. It seems that many are expecting the uninspiring 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.

Is There Any Growth For Ki-Star Real EstateLtd?

There's an inherent assumption that a company should underperform the market for P/E ratios like Ki-Star Real EstateLtd's to be considered reasonable.

Retrospectively, the last year delivered a decent 6.6% gain to the company's bottom line. Ultimately though, it couldn't turn around the poor performance of the prior period, with EPS shrinking 46% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 28% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 9.9% growth forecast for the broader market.

With this information, we find it odd that Ki-Star Real EstateLtd is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

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

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 Ki-Star Real EstateLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Ki-Star Real EstateLtd (1 is potentially serious) you should be aware of.

Of course, you might also be able to find a better stock than Ki-Star Real EstateLtd. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.