BuySell Technologies Co.,Ltd.'s (TSE:7685) P/E Is Still On The Mark Following 31% Share Price Bounce

BuySell Technologies Co.,Ltd. (TSE:7685) shares have had a really impressive month, gaining 31% after a shaky period beforehand. The annual gain comes to 116% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, BuySell TechnologiesLtd may be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 36.9x, since almost half of all companies in Japan have P/E ratios under 12x 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.

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Recent times have been advantageous for BuySell TechnologiesLtd as its earnings have been rising faster than most other companies. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

See 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.

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

In order to justify its P/E ratio, BuySell TechnologiesLtd would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered an exceptional 68% gain to the company's bottom line. The latest three year period has also seen an excellent 77% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 35% each year as estimated by the four analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 9.8% 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 Final Word

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.

We've established that BuySell TechnologiesLtd 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. 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 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us.

You might be able to find a better investment than BuySell TechnologiesLtd. 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.