BuySell Technologies Co.,Ltd.'s (TSE:7685) 25% Jump Shows Its Popularity With Investors

BuySell Technologies Co.,Ltd. (TSE:7685) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 76% in the last year.

Since its price has surged higher, given close to half the companies in Japan have price-to-earnings ratios (or "P/E's") below 14x, you may consider BuySell TechnologiesLtd as a stock to avoid entirely with its 26x 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.

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BuySell TechnologiesLtd certainly has been doing a good job lately as it's been growing earnings more than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Check out our latest analysis for BuySell TechnologiesLtd

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

Is There Enough Growth For BuySell TechnologiesLtd?

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

If we review the last year of earnings growth, the company posted a terrific increase of 91%. The latest three year period has also seen an excellent 137% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 26% over the next year. With the market only predicted to deliver 9.2%, the company is positioned for a stronger earnings result.

In light of this, it's understandable that BuySell TechnologiesLtd's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On BuySell TechnologiesLtd's P/E

The strong share price surge has got BuySell TechnologiesLtd's P/E rushing to great heights as well. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of BuySell TechnologiesLtd's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware BuySell TechnologiesLtd is showing 1 warning sign in our investment analysis, you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.