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華爾街日報Take Care Before Jumping Onto Namura Shipbuilding Co., Ltd. (TSE:7014) Even Though It's 27% Cheaper
Namura Shipbuilding Co., Ltd. (TSE:7014) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. The good news is that in the last year, the stock has shone bright like a diamond, gaining 119%.
Although its price has dipped substantially, Namura Shipbuilding's price-to-earnings (or "P/E") ratio of 12.1x might still make it look like a buy right now compared to the market in Japan, where around half of the companies have P/E ratios above 15x and even P/E's above 22x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
Namura Shipbuilding hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. 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 Namura Shipbuilding
How Is Namura Shipbuilding's Growth Trending?
Namura Shipbuilding's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than 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 24%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 124% in total over the last three years. 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 9.3% each year over the next three years. With the market predicted to deliver 8.9% growth each year, the company is positioned for a comparable earnings result.
In light of this, it's peculiar that Namura Shipbuilding's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
The Bottom Line On Namura Shipbuilding's P/E
The softening of Namura Shipbuilding's shares means its P/E is now sitting at a pretty low level. 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.
We've established that Namura Shipbuilding currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.
Before you settle on your opinion, we've discovered 1 warning sign for Namura Shipbuilding that you should be aware of.
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.