Integral Corporation (TSE:5842) Stock Rockets 29% But Many Are Still Ignoring The Company

Those holding Integral Corporation (TSE:5842) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 20% in the last twelve months.

In spite of the firm bounce in price, Integral may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 5.5x, since almost half of all companies in Japan have P/E ratios greater than 14x and even P/E's higher than 21x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

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With earnings growth that's exceedingly strong of late, Integral has been doing very well. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. 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 out of favour.

See our latest analysis for Integral

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Is There Any Growth For Integral?

In order to justify its P/E ratio, Integral would need to produce anemic growth that's substantially trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 108%. The latest three year period has also seen an excellent 1,115% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 9.7% shows it's noticeably more attractive on an annualised basis.

With this information, we find it odd that Integral is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Key Takeaway

Integral's recent share price jump still sees its P/E sitting firmly flat on the ground. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

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

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Integral that you should be aware of.

If these risks are making you reconsider your opinion on Integral, 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.