Fast Fitness Japan Co., Ltd. (TSE: 7092) shares have soared 25%, but the company’s price and operations still lag the market.

Fast Fitness Japan Co., Ltd. (TSE:7092) shares have maintained their recent momentum, rising 25% in the last month alone. Unfortunately, despite last month’s strong performance, the 7.4% annual gain isn’t all that appealing.

Although the share price has soared, Fast Fitness Japan, with a P/E ratio of 11.8, can still be considered an attractive investment, considering that roughly half of Japanese companies have a price-to-earnings (or “P/E”) ratio above 15. However, there may be a reason for the low P/E, and further investigation is needed to determine whether it is justified.

Fast Fitness Japan’s recent earnings growth has been in line with the market. It’s possible that the low P/E ratio is because investors believe this modest earnings performance may start to slip. If not, existing shareholders have reason to be optimistic about the future direction of the share price.

Check out our latest analysis for Fast Fitness Japan

If you want to know what analysts are predicting for the future, check out our free This is a report from Fast Fitness Japan.

What are the growth trends of Fast Fitness Japan?

For Fast Fitness Japan to justify its P/E ratio, it would need to achieve slow growth that lags behind the market growth rate.

Looking back at revenue growth over the last year, the company recorded a respectable increase of 11%. Over the last three years, EPS has grown by an impressive 93% overall, aided somewhat by short-term performance. Therefore, let’s start by looking at the company’s strong contributions to revenue growth over this period.

Looking to the future, the only analyst covering the company predicts that revenue is expected to grow 5.6% per year over the next three years. With the market expected to grow 9.6% per year, the company’s revenue is expected to stagnate.

With this in mind, it’s not surprising that Fast Fitness Japan’s P/E ratio is lower than the majority of other companies, as most investors are expecting limited future growth and are therefore willing to pay less for the stock.

What can we learn from Fast Fitness Japan’s P/E ratio?

The recent surge in its share price has not brought Fast Fitness Japan’s P/E ratio closer to the market average. While one should generally refrain from placing undue importance on P/E ratios when making investment decisions, they can reveal a lot about what other market participants think of the company.

Fast Fitness Japan has been found to be maintaining a low P/E ratio due to weaker growth forecasts, which are lower than the overall market, as expected. At this point, investors feel that the potential for earnings improvement is not great enough to justify an increase in the P/E ratio. Unless these conditions improve, the stock price will likely continue to have a barrier around these levels.

Remember that there may be other risks. For example, we have identified the following risks: 2 warning signs for Fast Fitness Japan Something you should know.

You may find better investments than Fast Fitness Japan. If you want to narrow down your options, check here. free A list of interesting companies trading at a low P/E (but that have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.