Investors Continue Waiting On Sidelines For Okura Industrial Co., Ltd. (TSE:4221)

Okura Industrial Co., Ltd.'s (TSE:4221) price-to-earnings (or "P/E") ratio of 7.1x might make it look like a buy right now compared to the market in Japan, where around half of the companies have P/E ratios above 13x and even P/E's above 20x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent earnings growth for Okura Industrial has been in line with the market. It might be that many expect the mediocre earnings performance to degrade, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Check out our latest analysis for Okura Industrial

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

Does Growth Match The Low P/E?

Okura Industrial'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.

Retrospectively, the last year delivered a decent 9.9% gain to the company's bottom line. EPS has also lifted 21% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 8.8% per annum during the coming three years according to the one analyst following the company. That's shaping up to be similar to the 9.6% per year growth forecast for the broader market.

In light of this, it's peculiar that Okura Industrial's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

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.

Our examination of Okura Industrial's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Okura Industrial you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.

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