Despite an already strong run, Japan Electronic Materials Corporation (TSE:6855) shares have been powering on, with a gain of 26% in the last thirty days. Looking further back, the 21% rise over the last twelve months isn’t too bad notwithstanding the strength over the last 30 days.
Although its price has surged higher, Japan Electronic Materials may still be sending bullish signals at the moment with its price-to-earnings (or “P/E”) ratio of 10x, since almost half of all companies in Japan have P/E ratios greater than 15x and even P/E’s higher than 23x 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.
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With earnings growth that’s superior to most other companies of late, Japan Electronic Materials has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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 out of favour.
See our latest analysis for Japan Electronic Materials
TSE:6855 Price to Earnings Ratio vs Industry September 5th 2025 Keen to find out how analysts think Japan Electronic Materials’ future stacks up against the industry? In that case, our free report is a great place to start. Is There Any Growth For Japan Electronic Materials?
There’s an inherent assumption that a company should underperform the market for P/E ratios like Japan Electronic Materials’ to be considered reasonable.
Retrospectively, the last year delivered an exceptional 183% gain to the company’s bottom line. However, the latest three year period hasn’t been as great in aggregate as it didn’t manage to provide any growth at all. Therefore, it’s fair to say that earnings growth has been inconsistent recently for the company.
Turning to the outlook, the next three years should generate growth of 4.9% each year as estimated by the sole analyst watching the company. Meanwhile, the rest of the market is forecast to expand by 9.5% each year, which is noticeably more attractive.
In light of this, it’s understandable that Japan Electronic Materials’ P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
What We Can Learn From Japan Electronic Materials’ P/E?
The latest share price surge wasn’t enough to lift Japan Electronic Materials’ P/E close to the market median. We’d say the price-to-earnings ratio’s power isn’t primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We’ve established that Japan Electronic Materials maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn’t great enough to justify a higher P/E ratio. It’s hard to see the share price rising strongly in the near future under these circumstances.
It’s always necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Japan Electronic Materials, and understanding them should be part of your investment process.
Of course, you might also be able to find a better stock than Japan Electronic Materials. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.
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