Investors Interested In KOSE Holdings Corporation's (TSE:4922) Earnings

When close to half the companies in Japan have price-to-earnings ratios (or "P/E's") below 14x, you may consider KOSE Holdings Corporation (TSE:4922) as a stock to avoid entirely with its 40x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

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KOSE Holdings 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. If not, then existing shareholders may be extremely nervous about the viability of the share price.

See our latest analysis for KOSE Holdings

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

How Is KOSE Holdings' Growth Trending?

In order to justify its P/E ratio, KOSE Holdings would need to produce outstanding growth well in excess of the market.

Retrospectively, the last year delivered a frustrating 5.6% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 60% 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 31% each year during the coming three years according to the twelve analysts following the company. That's shaping up to be materially higher than the 9.0% per annum growth forecast for the broader market.

With this information, we can see why KOSE Holdings is trading at such a high P/E compared to the market. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On KOSE Holdings' P/E

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of KOSE Holdings' analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware KOSE Holdings is showing 2 warning signs in our investment analysis, and 1 of those 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.