Positive Sentiment Still Eludes Hagiwara Electric Holdings Co., Ltd. (TSE:7467) Following 30% Share Price Slump

Hagiwara Electric Holdings Co., Ltd. (TSE:7467) shareholders that were waiting for something to happen have been dealt a blow with a 30% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 11% share price drop.

Although its price has dipped substantially, Hagiwara Electric Holdings may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 6.4x, since almost half of all companies in Japan have P/E ratios greater than 14x and even P/E's higher than 21x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Hagiwara Electric Holdings could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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.

View our latest analysis for Hagiwara Electric Holdings

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

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

In order to justify its P/E ratio, Hagiwara Electric Holdings would need to produce anemic growth that's substantially trailing the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 17%. Even so, admirably EPS has lifted 70% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Shifting to the future, estimates from the only analyst covering the company suggest earnings should grow by 25% over the next year. That's shaping up to be materially higher than the 9.8% growth forecast for the broader market.

With this information, we find it odd that Hagiwara Electric Holdings is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

Shares in Hagiwara Electric Holdings have plummeted and its P/E is now low enough to touch the ground. 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.

Our examination of Hagiwara Electric Holdings' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Hagiwara Electric Holdings that you need to be mindful of.

If you're unsure about the strength of Hagiwara Electric Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.

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