HYUGA PRIMARY CARE Co.,Ltd.'s (TSE:7133) 30% Jump Shows Its Popularity With Investors

HYUGA PRIMARY CARE Co.,Ltd. (TSE:7133) shareholders have had their patience rewarded with a 30% share price jump in the last month. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 4.7% in the last twelve months.

After such a large jump in price, HYUGA PRIMARY CARELtd may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 35.3x, since almost half of all companies in Japan have P/E ratios under 14x and even P/E's lower than 9x are not unusual. 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.

While the market has experienced earnings growth lately, HYUGA PRIMARY CARELtd's earnings have gone into reverse gear, which is not great. 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

Want the full picture on analyst estimates for the company? Then our free report on HYUGA PRIMARY CARELtd will help you uncover what's on the horizon.

Is There Enough Growth For HYUGA PRIMARY CARELtd?

HYUGA PRIMARY CARELtd's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 31%. Still, the latest three year period has seen an excellent 113% overall rise in EPS, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 34% each year as estimated by the lone analyst watching the company. With the market only predicted to deliver 10% each year, the company is positioned for a stronger earnings result.

With this information, we can see why HYUGA PRIMARY CARELtd is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Shares in HYUGA PRIMARY CARELtd have built up some good momentum lately, which has really inflated its P/E. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

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. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for HYUGA PRIMARY CARELtd with six simple checks will allow you to discover any risks that could be an issue.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.