Investors Still Waiting For A Pull Back In Ship Healthcare Holdings, Inc. (TSE:3360)

There wouldn't be many who think Ship Healthcare Holdings, Inc.'s (TSE:3360) price-to-earnings (or "P/E") ratio of 15x is worth a mention when the median P/E in Japan is similar at about 13x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

With earnings growth that's inferior to most other companies of late, Ship Healthcare Holdings has been relatively sluggish. It might be that many expect the uninspiring earnings performance to strengthen positively, which has kept the P/E from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

View our latest analysis for Ship Healthcare Holdings

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

Does Growth Match The P/E?

The only time you'd be comfortable seeing a P/E like Ship Healthcare Holdings' is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 2.8% last year. EPS has also lifted 13% in aggregate from three years ago, partly 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 10.0% per annum over the next three years. That's shaping up to be similar to the 9.4% each year growth forecast for the broader market.

In light of this, it's understandable that Ship Healthcare Holdings' P/E sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

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.

As we suspected, our examination of Ship Healthcare Holdings' 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. Unless these conditions change, they will continue to support the share price at these levels.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Ship Healthcare Holdings with six simple checks will allow you to discover any risks that could be an issue.

You might be able to find a better investment than Ship Healthcare Holdings. 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.