Japan Post Insurance Co., Ltd.'s (TSE:7181) Share Price Is Matching Sentiment Around Its Earnings

When close to half the companies in Japan have price-to-earnings ratios (or "P/E's") above 13x, you may consider Japan Post Insurance Co., Ltd. (TSE:7181) as an attractive investment with its 10x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

We've discovered 3 warning signs about Japan Post Insurance. View them for free.

Recent times have been advantageous for Japan Post Insurance as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Japan Post Insurance

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

How Is Japan Post Insurance's Growth Trending?

Japan Post Insurance's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 23% last year. Still, incredibly EPS has fallen 16% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 3.2% per annum during the coming three years according to the six analysts following the company. With the market predicted to deliver 9.8% growth per year, the company is positioned for a weaker earnings result.

With this information, we can see why Japan Post Insurance is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Japan Post Insurance's 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 Japan Post Insurance's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for Japan Post Insurance (2 are potentially serious!) that you should be aware of.

If you're unsure about the strength of Japan Post Insurance's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.