Morinaga&Co., Ltd.'s (TSE:2201) Earnings Haven't Escaped The Attention Of Investors

There wouldn't be many who think Morinaga&Co., Ltd.'s (TSE:2201) price-to-earnings (or "P/E") ratio of 15.5x is worth a mention when the median P/E in Japan is similar at about 15x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Morinaga&Co certainly has been doing a good job lately as it's been growing earnings more than most other companies. 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 Morinaga&Co

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

How Is Morinaga&Co's Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like Morinaga&Co's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 59% gain to the company's bottom line. EPS has also lifted 28% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 9.6% each year over the next three years. That's shaping up to be similar to the 9.6% per year growth forecast for the broader market.

In light of this, it's understandable that Morinaga&Co's P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From Morinaga&Co'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.

As we suspected, our examination of Morinaga&Co's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

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 Morinaga&Co with six simple checks.

You might be able to find a better investment than Morinaga&Co. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com