More Unpleasant Surprises Could Be In Store For FUJIFILM Holdings Corporation's (TSE:4901) Shares After Tumbling 29%

FUJIFILM Holdings Corporation (TSE:4901) shareholders won't be pleased to see that the share price has had a very rough month, dropping 29% and undoing the prior period's positive performance. The last month has meant the stock is now only up 3.3% during the last year.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about FUJIFILM Holdings' P/E ratio of 13.7x, since the median price-to-earnings (or "P/E") ratio in Japan is also close to 13x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent earnings growth for FUJIFILM Holdings has been in line with the market. The P/E is probably moderate because investors think this modest earnings performance will continue. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

Check out our latest analysis for FUJIFILM Holdings

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

Is There Some Growth For FUJIFILM Holdings?

FUJIFILM Holdings' 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.

If we review the last year of earnings growth, the company posted a worthy increase of 11%. This was backed up an excellent period prior to see EPS up by 34% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 6.9% each year during the coming three years according to the analysts following the company. Meanwhile, the rest of the market is forecast to expand by 9.6% per year, which is noticeably more attractive.

In light of this, it's curious that FUJIFILM Holdings' P/E sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/E falls to levels more in line with the growth outlook.

The Bottom Line On FUJIFILM Holdings' P/E

With its share price falling into a hole, the P/E for FUJIFILM Holdings looks quite average now. 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.

Our examination of FUJIFILM Holdings' analyst forecasts revealed that its inferior earnings outlook isn't impacting its P/E as much as we would have predicted. When we see a weak earnings outlook with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

You always need to take note of risks, for example - FUJIFILM Holdings has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on FUJIFILM Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com