More Unpleasant Surprises Could Be In Store For Delivery Consulting Inc.'s (TSE:9240) Shares After Tumbling 28%

Simply Wall St · 10/16 23:54

Delivery Consulting Inc. (TSE:9240) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. Indeed, the recent drop has reduced its annual gain to a relatively sedate 2.8% over the last twelve months.

In spite of the heavy fall in price, it's still not a stretch to say that Delivery Consulting's price-to-earnings (or "P/E") ratio of 14.6x right now seems quite "middle-of-the-road" compared to the market in Japan, where the median P/E ratio is around 14x. While this might not raise any eyebrows, if the P/E ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Recent times have been quite advantageous for Delivery Consulting as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for Delivery Consulting

pe-multiple-vs-industry
TSE:9240 Price to Earnings Ratio vs Industry October 16th 2024
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Delivery Consulting's earnings, revenue and cash flow.

How Is Delivery Consulting's Growth Trending?

Delivery Consulting's P/E ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the market.

If we review the last year of earnings growth, the company posted a terrific increase of 447%. However, this wasn't enough as the latest three year period has seen a very unpleasant 32% drop in EPS in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 10% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

In light of this, it's somewhat alarming that Delivery Consulting's P/E sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh on the share price eventually.

What We Can Learn From Delivery Consulting's P/E?

Delivery Consulting's plummeting stock price has brought its P/E right back to the rest of the market. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Delivery Consulting revealed its shrinking earnings over the medium-term aren't impacting its P/E as much as we would have predicted, given the market is set to grow. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.

Before you settle on your opinion, we've discovered 3 warning signs for Delivery Consulting that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).