Not Many Are Piling Into Growth X Partners,Inc. (TSE:244A) Just Yet

With a median price-to-earnings (or "P/E") ratio of close to 13x in Japan, you could be forgiven for feeling indifferent about Growth X Partners,Inc.'s (TSE:244A) P/E ratio of 14.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

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The earnings growth achieved at Growth X PartnersInc over the last year would be more than acceptable for most companies. One possibility is that the P/E is moderate because investors think this respectable earnings growth might not be enough to outperform the broader market in the near future. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

See our latest analysis for Growth X PartnersInc

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Growth X PartnersInc will help you shine a light on its historical performance.

Does Growth Match The P/E?

Growth X PartnersInc's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

Retrospectively, the last year delivered a decent 12% gain to the company's bottom line. Pleasingly, EPS has also lifted 98% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 8.3% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Growth X PartnersInc is trading at a fairly similar P/E to the market. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

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.

We've established that Growth X PartnersInc currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

You need to take note of risks, for example - Growth X PartnersInc has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.