PKSHA Technology Inc.'s (TSE:3993) Share Price Is Still Matching Investor Opinion Despite 29% Slump

The PKSHA Technology Inc. (TSE:3993) share price has fared very poorly over the last month, falling by a substantial 29%. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 16%.

In spite of the heavy fall in price, PKSHA Technology may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 65.2x, 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. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, PKSHA Technology has been doing relatively well. The P/E is probably high because investors think this strong earnings performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Check out our latest analysis for PKSHA Technology

Keen to find out how analysts think PKSHA Technology's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Growth For PKSHA Technology?

The only time you'd be truly comfortable seeing a P/E as steep as PKSHA Technology'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 terrific increase of 107%. Still, incredibly EPS has fallen 4.6% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 28% each year during the coming three years according to the three analysts following the company. That's shaping up to be materially higher than the 9.7% each year growth forecast for the broader market.

In light of this, it's understandable that PKSHA Technology'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 PKSHA Technology's P/E

Even after such a strong price drop, PKSHA Technology's P/E still exceeds the rest of the market significantly. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of PKSHA Technology's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for PKSHA Technology that you should be aware of.

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.