Market Participants Recognise JINS HOLDINGS Inc.'s (TSE:3046) Earnings Pushing Shares 27% Higher

Despite an already strong run, JINS HOLDINGS Inc. (TSE:3046) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 59% in the last year.

Following the firm bounce in price, given close to half the companies in Japan have price-to-earnings ratios (or "P/E's") below 13x, you may consider JINS HOLDINGS as a stock to avoid entirely with its 31.7x 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.

Recent times have been advantageous for JINS HOLDINGS as its earnings have been rising faster than most other companies. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

View our latest analysis for JINS HOLDINGS

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

Is There Enough Growth For JINS HOLDINGS?

There's an inherent assumption that a company should far outperform the market for P/E ratios like JINS HOLDINGS' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 165% gain to the company's bottom line. The latest three year period has also seen an excellent 42% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 13% each year over the next three years. That's shaping up to be materially higher than the 9.7% per annum growth forecast for the broader market.

With this information, we can see why JINS HOLDINGS 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 JINS HOLDINGS' P/E

Shares in JINS HOLDINGS have built up some good momentum lately, which has really inflated its P/E. 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.

We've established that JINS HOLDINGS maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. 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.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for JINS HOLDINGS with six simple checks.

You might be able to find a better investment than JINS 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.