Good Com Asset Co., Ltd. (TSE:3475) Stock Rockets 32% But Many Are Still Ignoring The Company

The Good Com Asset Co., Ltd. (TSE:3475) share price has done very well over the last month, posting an excellent gain of 32%. Taking a wider view, although not as strong as the last month, the full year gain of 23% is also fairly reasonable.

Even after such a large jump in price, Good Com Asset's price-to-earnings (or "P/E") ratio of 9.2x might still 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 12x and even P/E's above 18x 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.

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Good Com Asset certainly has been doing a great job lately as it's been growing earnings at a really rapid pace. One possibility is that the P/E is low because investors think this strong earnings growth might actually underperform the broader market in the near future. 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 Good Com Asset

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Good Com Asset will help you shine a light on its historical performance.

Is There Any Growth For Good Com Asset?

In order to justify its P/E ratio, Good Com Asset would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 218% last year. The strong recent performance means it was also able to grow EPS by 106% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Comparing that to the market, which is only predicted to deliver 10% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

With this information, we find it odd that Good Com Asset is trading at a P/E lower than the market. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What We Can Learn From Good Com Asset's P/E?

The latest share price surge wasn't enough to lift Good Com Asset's P/E close to the market median. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Good Com Asset revealed its three-year earnings trends aren't contributing to its P/E anywhere near as much as we would have predicted, given they look better than current market expectations. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Good Com Asset that you should be aware of.

You might be able to find a better investment than Good Com Asset. 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.