HYUGA PRIMARY CARE Co.,Ltd. (TSE:7133) Shares Slammed 28% But Getting In Cheap Might Be Difficult Regardless

To the annoyance of some shareholders, HYUGA PRIMARY CARE Co.,Ltd. (TSE:7133) shares are down a considerable 28% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 36% in that time.

In spite of the heavy fall in price, HYUGA PRIMARY CARELtd's price-to-earnings (or "P/E") ratio of 19x might still make it look like a 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. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.

HYUGA PRIMARY CARELtd could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Check out our latest analysis for HYUGA PRIMARY CARELtd

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

How Is HYUGA PRIMARY CARELtd's Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like HYUGA PRIMARY CARELtd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 42% decrease to the company's bottom line. Still, the latest three year period has seen an excellent 115% overall rise in EPS, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Looking ahead now, EPS is anticipated to climb by 42% per annum during the coming three years according to the one analyst following the company. With the market only predicted to deliver 9.6% per year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that HYUGA PRIMARY CARELtd's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On HYUGA PRIMARY CARELtd's P/E

There's still some solid strength behind HYUGA PRIMARY CARELtd's P/E, if not its share price lately. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of HYUGA PRIMARY CARELtd's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 3 warning signs for HYUGA PRIMARY CARELtd (1 makes us a bit uncomfortable!) that you need to be mindful of.

If these risks are making you reconsider your opinion on HYUGA PRIMARY CARELtd, 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.

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