Improved Earnings Required Before Chugoku Marine Paints, Ltd. (TSE:4617) Stock's 25% Jump Looks Justified

Simply Wall St

Chugoku Marine Paints, Ltd. (TSE:4617) shares have continued their recent momentum with a 25% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 33%.

Even after such a large jump in price, given about half the companies in Japan have price-to-earnings ratios (or "P/E's") above 14x, you may still consider Chugoku Marine Paints as an attractive investment with its 10.4x 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.

Recent times have been advantageous for Chugoku Marine Paints as its earnings have been rising faster than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Chugoku Marine Paints

TSE:4617 Price to Earnings Ratio vs Industry July 18th 2025
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Chugoku Marine Paints.

Is There Any Growth For Chugoku Marine Paints?

The only time you'd be truly comfortable seeing a P/E as low as Chugoku Marine Paints' is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a terrific increase of 39%. Pleasingly, EPS has also lifted 5,531% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 0.2% per annum during the coming three years according to the two analysts following the company. Meanwhile, the rest of the market is forecast to expand by 8.9% per year, which is noticeably more attractive.

With this information, we can see why Chugoku Marine Paints 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.

The Key Takeaway

Chugoku Marine Paints' stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

We've established that Chugoku Marine Paints maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Chugoku Marine Paints with six simple checks will allow you to discover any risks that could be an issue.

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.

Valuation is complex, but we're here to simplify it.

Discover if Chugoku Marine Paints might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.