Yoshimura Food Holdings K.K.'s (TSE:2884) Share Price Matching Investor Opinion

Yoshimura Food Holdings K.K.'s (TSE:2884) price-to-earnings (or "P/E") ratio of 32x might make it look like a strong sell right now compared to the market in Japan, where around half of the companies have P/E ratios below 13x and even P/E's below 9x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

With earnings growth that's superior to most other companies of late, Yoshimura Food Holdings K.K has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for Yoshimura Food Holdings K.K

Keen to find out how analysts think Yoshimura Food Holdings K.K'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?

In order to justify its P/E ratio, Yoshimura Food Holdings K.K would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 76% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 85% 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.

Shifting to the future, estimates from the lone analyst covering the company suggest earnings should grow by 12% each year over the next three years. With the market only predicted to deliver 9.3% per year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Yoshimura Food Holdings K.K's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Yoshimura Food Holdings K.K's 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.

As we suspected, our examination of Yoshimura Food Holdings K.K's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Yoshimura Food Holdings K.K (including 2 which are concerning).

Of course, you might also be able to find a better stock than Yoshimura Food Holdings K.K. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.