Mitsubishi Research Institute, Inc.'s (TSE:3636) Popularity With Investors Is Clear

Simply Wall St · 04/14 21:32

Mitsubishi Research Institute, Inc.'s (TSE:3636) price-to-earnings (or "P/E") ratio of 15.3x might make it look like a sell right now compared to the market in Japan, where around half of the companies have P/E ratios below 12x and even P/E's below 8x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

We check all companies for important risks. See what we found for Mitsubishi Research Institute in our free report.

Mitsubishi Research Institute hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. One possibility is that the P/E is high because investors think this poor earnings performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Mitsubishi Research Institute

pe-multiple-vs-industry
TSE:3636 Price to Earnings Ratio vs Industry April 14th 2025
Want the full picture on analyst estimates for the company? Then our free report on Mitsubishi Research Institute will help you uncover what's on the horizon.

How Is Mitsubishi Research Institute's Growth Trending?

There's an inherent assumption that a company should outperform the market for P/E ratios like Mitsubishi Research Institute's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 22% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 36% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 17% per year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 9.7% each year, which is noticeably less attractive.

In light of this, it's understandable that Mitsubishi Research Institute's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Mitsubishi Research Institute's P/E?

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Mitsubishi Research Institute's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Mitsubishi Research Institute with six simple checks on some of these key factors.

You might be able to find a better investment than Mitsubishi Research Institute. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).