Little Excitement Around Shin Nippon Biomedical Laboratories, Ltd.'s (TSE:2395) Earnings As Shares Take 28% Pounding

Unfortunately for some shareholders, the Shin Nippon Biomedical Laboratories, Ltd. (TSE:2395) share price has dived 28% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 60% loss during that time.

Since its price has dipped substantially, Shin Nippon Biomedical Laboratories may be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 7.4x, since almost half of all companies in Japan have P/E ratios greater than 14x and even P/E's higher than 21x 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 limited.

While the market has experienced earnings growth lately, Shin Nippon Biomedical Laboratories' earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour 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.

Check out our latest analysis for Shin Nippon Biomedical Laboratories

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

How Is Shin Nippon Biomedical Laboratories' Growth Trending?

Shin Nippon Biomedical Laboratories' 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 frustrating 8.7% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 51% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 3.0% each year over the next three years. Meanwhile, the rest of the market is forecast to expand by 9.6% each year, which is noticeably more attractive.

In light of this, it's understandable that Shin Nippon Biomedical Laboratories' P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Shin Nippon Biomedical Laboratories' P/E?

The softening of Shin Nippon Biomedical Laboratories' shares means its P/E is now sitting at a pretty low level. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Shin Nippon Biomedical Laboratories' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. 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.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Shin Nippon Biomedical Laboratories (of which 2 are a bit unpleasant!) you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.

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