With A 33% Price Drop For Secure, Inc. (TSE:4264) You'll Still Get What You Pay For

The Secure, Inc. (TSE:4264) share price has fared very poorly over the last month, falling by a substantial 33%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 13% share price drop.

Even after such a large drop in price, Secure may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 28.2x, since almost half of all companies in Japan have P/E ratios under 12x and even P/E's lower than 8x 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.

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Recent times have been advantageous for Secure 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Secure

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Secure .

How Is Secure's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as steep as Secure'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 42%. The strong recent performance means it was also able to grow EPS by 36% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Shifting to the future, estimates from the only analyst covering the company suggest earnings should grow by 68% per annum over the next three years. With the market only predicted to deliver 9.7% each year, the company is positioned for a stronger earnings result.

In light of this, it's understandable that Secure'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

A significant share price dive has done very little to deflate Secure's very lofty P/E. 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.

We've established that Secure 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.

You should always think about risks. Case in point, we've spotted 3 warning signs for Secure 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.