internet infinity Inc. (TSE:6545) Stock Rockets 26% But Many Are Still Ignoring The Company

internet infinity Inc. (TSE:6545) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 42% in the last year.

Although its price has surged higher, there still wouldn't be many who think internet infinity's price-to-earnings (or "P/E") ratio of 14.5x is worth a mention when the median P/E in Japan is similar at about 13x. 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.

Recent times have been advantageous for internet infinity as its earnings have been rising faster 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.

See our latest analysis for internet infinity

If you'd like to see what analysts are forecasting going forward, you should check out our free report on internet infinity.

What Are Growth Metrics Telling Us About The P/E?

In order to justify its P/E ratio, internet infinity 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 57%. The latest three year period has also seen a 19% overall rise in EPS, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Shifting to the future, estimates from the only analyst covering the company suggest earnings should grow by 24% over the next year. That's shaping up to be materially higher than the 10% growth forecast for the broader market.

With this information, we find it interesting that internet infinity is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On internet infinity's P/E

internet infinity's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. 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.

We've established that internet infinity currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Plus, you should also learn about these 2 warning signs we've spotted with internet infinity.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.