Getting In Cheap On Nippon Express Holdings,Inc. (TSE:9147) Might Be Difficult

When close to half the companies in Japan have price-to-earnings ratios (or "P/E's") below 14x, you may consider Nippon Express Holdings,Inc. (TSE:9147) as a stock to potentially avoid with its 19x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

Nippon Express HoldingsInc could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

View our latest analysis for Nippon Express HoldingsInc

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

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

In order to justify its P/E ratio, Nippon Express HoldingsInc would need to produce impressive growth in excess of the market.

Retrospectively, the last year delivered a frustrating 65% decrease to the company's bottom line. That put a dampener on the good run it was having over the longer-term as its three-year EPS growth is still a noteworthy 30% in total. So we can start by confirming that the company has generally done a good job of growing earnings over that time, even though it had some hiccups along the way.

Looking ahead now, EPS is anticipated to climb by 23% per annum during the coming three years according to the eight analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 11% each year, which is noticeably less attractive.

In light of this, it's understandable that Nippon Express HoldingsInc'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 Bottom Line On Nippon Express HoldingsInc's P/E

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 Nippon Express HoldingsInc 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. Unless these conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Nippon Express HoldingsInc, and understanding these should be part of your investment process.

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.