Market Cool On Financial Partners Group Co.,Ltd.'s (TSE:7148) Earnings Pushing Shares 26% Lower

The Financial Partners Group Co.,Ltd. (TSE:7148) share price has fared very poorly over the last month, falling by a substantial 26%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 39% share price drop.

Although its price has dipped substantially, Financial Partners GroupLtd may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 7.8x, since almost half of all companies in Japan have P/E ratios greater than 15x and even P/E's higher than 22x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

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Financial Partners GroupLtd could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. 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.

Check out our latest analysis for Financial Partners GroupLtd

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Does Growth Match The Low P/E?

In order to justify its P/E ratio, Financial Partners GroupLtd would need to produce sluggish growth that's 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 9.9%. Still, the latest three year period has seen an excellent 118% overall rise in EPS, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 12% each year as estimated by the only analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 9.0% per annum, which is noticeably less attractive.

With this information, we find it odd that Financial Partners GroupLtd 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.

What We Can Learn From Financial Partners GroupLtd's P/E?

Financial Partners GroupLtd's recently weak share price has pulled its P/E below most other companies. 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.

We've established that Financial Partners GroupLtd currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

You always need to take note of risks, for example - Financial Partners GroupLtd has 3 warning signs we think you should be aware of.

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

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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.