The Price Is Right For Kohoku Kogyo CO.,LTD. (TSE:6524) Even After Diving 30%

Unfortunately for some shareholders, the Kohoku Kogyo CO.,LTD. (TSE:6524) share price has dived 30% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 16% share price drop.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Kohoku KogyoLTD's P/E ratio of 11.5x, since the median price-to-earnings (or "P/E") ratio in Japan is also close to 12x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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With earnings growth that's superior to most other companies of late, Kohoku KogyoLTD has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Kohoku KogyoLTD

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

What Are Growth Metrics Telling Us About The P/E?

Kohoku KogyoLTD'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 an exceptional 71% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 3.6% drop in EPS in aggregate. 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 8.5% per year during the coming three years according to the three analysts following the company. That's shaping up to be similar to the 9.7% per year growth forecast for the broader market.

In light of this, it's understandable that Kohoku KogyoLTD's P/E sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Kohoku KogyoLTD's P/E

Kohoku KogyoLTD's plummeting stock price has brought its P/E right back to the rest of the market. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Kohoku KogyoLTD maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for Kohoku KogyoLTD that you need to take into consideration.

You might be able to find a better investment than Kohoku KogyoLTD. 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.