QLS Holdings Co., Ltd (TSE:7075) Could Be Riskier Than It Looks

There wouldn't be many who think QLS Holdings Co., Ltd's (TSE:7075) price-to-earnings (or "P/E") ratio of 13.9x is worth a mention when the median P/E in Japan is similar at about 13x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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QLS Holdings certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. 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 not quite in favour.

Check out our latest analysis for QLS Holdings

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on QLS Holdings will help you shine a light on its historical performance.

Is There Some Growth For QLS Holdings?

In order to justify its P/E ratio, QLS Holdings would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 49%. The strong recent performance means it was also able to grow EPS by 4,491% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Comparing that to the market, which is only predicted to deliver 10% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it interesting that QLS Holdings is trading at a fairly similar P/E to the market. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From QLS Holdings' P/E?

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of QLS Holdings revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look better than current market expectations. There could be some unobserved threats to earnings preventing the P/E ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

And what about other risks? Every company has them, and we've spotted 1 warning sign for QLS Holdings you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.