Jp-Holdings,Inc. (TSE:2749) Stock Rockets 30% As Investors Are Less Pessimistic Than Expected

Despite an already strong run, Jp-Holdings,Inc. (TSE:2749) shares have been powering on, with a gain of 30% in the last thirty days. The last month tops off a massive increase of 121% in the last year.

Since its price has surged higher, Jp-HoldingsInc may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 17.9x, since almost half of all companies in Japan have P/E ratios under 13x and even P/E's lower than 9x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

With earnings growth that's superior to most other companies of late, Jp-HoldingsInc has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Jp-HoldingsInc

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

Does Growth Match The High P/E?

Jp-HoldingsInc's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 24% last year. The strong recent performance means it was also able to grow EPS by 653% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 3.1% each year during the coming three years according to the one analyst following the company. That's shaping up to be materially lower than the 9.4% per annum growth forecast for the broader market.

In light of this, it's alarming that Jp-HoldingsInc's P/E sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of earnings growth is likely to weigh heavily on the share price eventually.

The Key Takeaway

Jp-HoldingsInc shares have received a push in the right direction, but its P/E is elevated too. 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.

Our examination of Jp-HoldingsInc's analyst forecasts revealed that its inferior earnings outlook isn't impacting its high P/E anywhere near as much as we would have predicted. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Jp-HoldingsInc with six simple checks.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.