Earnings Tell The Story For Jp-Holdings,Inc. (TSE:2749) As Its Stock Soars 27%

Jp-Holdings,Inc. (TSE:2749) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 37% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Jp-HoldingsInc's P/E ratio of 15.8x, since the median price-to-earnings (or "P/E") ratio in Japan is also close to 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.

Recent earnings growth for Jp-HoldingsInc has been in line with the market. The P/E is probably moderate because investors think this modest earnings performance will continue. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

Check out our latest analysis for Jp-HoldingsInc

Want the full picture on analyst estimates for the company? Then our free report on Jp-HoldingsInc will help you uncover what's on the horizon.

What Are Growth Metrics Telling Us About The P/E?

The only time you'd be comfortable seeing a P/E like Jp-HoldingsInc'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 10%. The latest three year period has also seen an excellent 459% overall rise in EPS, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 9.5% each year as estimated by the only analyst watching the company. That's shaping up to be similar to the 9.5% each year growth forecast for the broader market.

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

The Final Word

Jp-HoldingsInc's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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 Jp-HoldingsInc's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. Unless these conditions change, they will continue to support the share price at these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Jp-HoldingsInc you should know about.

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.