Investors Give POPER Co.,Ltd. (TSE:5134) Shares A 38% Hiding

To the annoyance of some shareholders, POPER Co.,Ltd. (TSE:5134) shares are down a considerable 38% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 19% in that time.

In spite of the heavy fall in price, there still wouldn't be many who think POPERLtd's price-to-earnings (or "P/E") ratio of 16.1x is worth a mention when the median P/E in Japan is similar at about 14x. 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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Recent times have been quite advantageous for POPERLtd as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for POPERLtd

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on POPERLtd will help you shine a light on its historical performance.

How Is POPERLtd's Growth Trending?

The only time you'd be comfortable seeing a P/E like POPERLtd's is when the company's growth is tracking the market closely.

Taking a look back first, we see that the company grew earnings per share by an impressive 66% last year. Pleasingly, EPS has also lifted 1,667% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 9.0% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that POPERLtd's P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On POPERLtd's P/E

POPERLtd'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 POPERLtd currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

Plus, you should also learn about these 2 warning signs we've spotted with POPERLtd (including 1 which is a bit concerning).

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.