Market Participants Recognise JADE GROUP,Inc's (TSE:3558) Earnings Pushing Shares 34% Higher

Despite an already strong run, JADE GROUP,Inc (TSE:3558) shares have been powering on, with a gain of 34% in the last thirty days. The annual gain comes to 160% following the latest surge, making investors sit up and take notice.

After such a large jump in price, JADE GROUPInc may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 21.7x, since almost half of all companies in Japan have P/E ratios under 14x and even P/E's lower than 9x 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 so lofty.

Earnings have risen at a steady rate over the last year for JADE GROUPInc, which is generally not a bad outcome. It might be that many expect the reasonable earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for JADE GROUPInc

Although there are no analyst estimates available for JADE GROUPInc, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

What Are Growth Metrics Telling Us About The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as JADE GROUPInc'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 worthy increase of 4.6%. This was backed up an excellent period prior to see EPS up by 73% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

This is in contrast to the rest of the market, which is expected to grow by 11% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that JADE GROUPInc's P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

What We Can Learn From JADE GROUPInc's P/E?

JADE GROUPInc's P/E is flying high just like its stock has during the last month. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of JADE GROUPInc revealed its three-year earnings trends are contributing to its high P/E, given they look better than current market expectations. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for JADE GROUPInc 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.