TV Asahi Holdings Corporation (TSE:9409) Looks Inexpensive But Perhaps Not Attractive Enough

TV Asahi Holdings Corporation's (TSE:9409) price-to-earnings (or "P/E") ratio of 12.4x 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 15x and even P/E's above 23x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Recent times haven't been advantageous for TVhi Holdings as its earnings have been rising slower than most other companies. It seems that many are expecting the uninspiring earnings performance to persist, which has repressed the P/E. 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 TVhi Holdings

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

How Is TVhi Holdings' Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like TVhi Holdings' to be considered reasonable.

Retrospectively, the last year delivered a decent 3.2% gain to the company's bottom line. The latest three year period has also seen an excellent 38% overall rise in EPS, aided somewhat by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 0.1% each year as estimated by the five analysts watching the company. That's shaping up to be materially lower than the 9.5% per year growth forecast for the broader market.

With this information, we can see why TVhi Holdings 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 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.

As we suspected, our examination of TVhi 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 2 warning signs for TVhi Holdings that we have uncovered.

You might be able to find a better investment than TVhi Holdings. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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