Improved Earnings Required Before Kuriyama Holdings Corporation (TSE:3355) Shares Find Their Feet

With a price-to-earnings (or "P/E") ratio of 5.9x Kuriyama Holdings Corporation (TSE:3355) may be sending very bullish signals at the moment, given that almost half of all companies in Japan have P/E ratios greater than 13x and even P/E's higher than 20x 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 limited.

Recent times haven't been advantageous for Kuriyama Holdings as its earnings have been rising slower than most other companies. The P/E is probably low because investors think this lacklustre earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Kuriyama Holdings

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

How Is Kuriyama Holdings' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as depressed as Kuriyama Holdings' is when the company's growth is on track to lag the market decidedly.

If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period has seen an excellent 130% overall rise in EPS, in spite of its uninspiring short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Looking ahead now, EPS is anticipated to climb by 0.4% each year during the coming three years according to the one analyst following the company. Meanwhile, the rest of the market is forecast to expand by 9.7% each year, which is noticeably more attractive.

In light of this, it's understandable that Kuriyama Holdings' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

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 Kuriyama Holdings' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 1 warning sign for Kuriyama Holdings that you need to take into consideration.

If you're unsure about the strength of Kuriyama Holdings' 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.