Suzuyo Shinwart Corporation (TSE:9360) Soars 47% But It's A Story Of Risk Vs Reward

The Suzuyo Shinwart Corporation (TSE:9360) share price has done very well over the last month, posting an excellent gain of 47%. The last 30 days bring the annual gain to a very sharp 83%.

Even after such a large jump in price, given about half the companies in Japan have price-to-earnings ratios (or "P/E's") above 15x, you may still consider Suzuyo Shinwart as an attractive investment with its 12x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been quite advantageous for Suzuyo Shinwart as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Suzuyo Shinwart

Although there are no analyst estimates available for Suzuyo Shinwart, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Growth For Suzuyo Shinwart?

In order to justify its P/E ratio, Suzuyo Shinwart would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 230% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 206% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 11% shows it's noticeably more attractive on an annualised basis.

In light of this, it's peculiar that Suzuyo Shinwart's P/E sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Suzuyo Shinwart's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Suzuyo Shinwart currently trades on a much 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 significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 2 warning signs for Suzuyo Shinwart you should be aware of, and 1 of them makes us a bit uncomfortable.

You might be able to find a better investment than Suzuyo Shinwart. 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.