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华尔街日报Further Upside For Japan Oil Transportation Co., Ltd. (TSE:9074) Shares Could Introduce Price Risks After 27% Bounce
Japan Oil Transportation Co., Ltd. (TSE:9074) shares have continued their recent momentum with a 27% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 85%.
Although its price has surged higher, Japan Oil Transportation may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 11.7x, 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. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.
The earnings growth achieved at Japan Oil Transportation over the last year would be more than acceptable for most companies. It might be that many expect the respectable earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.
See our latest analysis for Japan Oil Transportation
What Are Growth Metrics Telling Us About The Low P/E?
There's an inherent assumption that a company should underperform the market for P/E ratios like Japan Oil Transportation's to be considered reasonable.
Taking a look back first, we see that the company managed to grow earnings per share by a handy 14% last year. This was backed up an excellent period prior to see EPS up by 31% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.
It's interesting to note that the rest of the market is similarly expected to grow by 9.0% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.
In light of this, it's peculiar that Japan Oil Transportation's P/E sits below the majority of other companies. It may be that most investors are not convinced the company can maintain recent growth rates.
The Bottom Line On Japan Oil Transportation's P/E
The latest share price surge wasn't enough to lift Japan Oil Transportation's P/E close to the market median. 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.
Our examination of Japan Oil Transportation revealed its three-year earnings trends aren't contributing to its P/E as much as we would have predicted, given they look similar to current market expectations. When we see average earnings with market-like 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.
Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Japan Oil Transportation that you should be aware of.
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.