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. The last 30 days bring the annual gain to a very sharp 40%.

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 29.1x 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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With earnings growth that's superior to most other companies of late, BuySell TechnologiesLtd has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. 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 95%. Pleasingly, EPS has also lifted 121% in aggregate from three years ago, thanks to the last 12 months of growth. 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 18% per year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 9.5% per annum, which is noticeably less attractive.

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

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

Before you settle on your opinion, we've discovered 2 warning signs for BuySell TechnologiesLtd that you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.