KeePer Technical Laboratory Co., Ltd. (TSE:6036) Not Lagging Market On Growth Or Pricing

When close to half the companies in Japan have price-to-earnings ratios (or "P/E's") below 13x, you may consider KeePer Technical Laboratory Co., Ltd. (TSE:6036) as a stock to avoid entirely with its 21x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.

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Recent times have been advantageous for KeePer Technical Laboratory as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for KeePer Technical Laboratory

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

How Is KeePer Technical Laboratory's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as KeePer Technical Laboratory's is when the company's growth is on track to outshine the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 19%. The strong recent performance means it was also able to grow EPS by 97% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 14% per year as estimated by the two analysts watching the company. That's shaping up to be materially higher than the 9.5% each year growth forecast for the broader market.

With this information, we can see why KeePer Technical Laboratory 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 Bottom Line On KeePer Technical Laboratory's P/E

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of KeePer Technical Laboratory'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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for KeePer Technical Laboratory (of which 1 is concerning!) you should know about.

If you're unsure about the strength of KeePer Technical Laboratory'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.