Investors Still Aren't Entirely Convinced By A.D.Works Group Co.,Ltd.'s (TSE:2982) Earnings Despite 27% Price Jump

Simply Wall St · 5d ago

The A.D.Works Group Co.,Ltd. (TSE:2982) share price has done very well over the last month, posting an excellent gain of 27%. Notwithstanding the latest gain, the annual share price return of 8.0% isn't as impressive.

Even after such a large jump in price, given about half the companies in Japan have price-to-earnings ratios (or "P/E's") above 13x, you may still consider A.D.Works GroupLtd as an attractive investment with its 8x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Our free stock report includes 3 warning signs investors should be aware of before investing in A.D.Works GroupLtd. Read for free now.

The earnings growth achieved at A.D.Works GroupLtd over the last year would be more than acceptable for most companies. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform the broader market in the near future. 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.

View our latest analysis for A.D.Works GroupLtd

pe-multiple-vs-industry
TSE:2982 Price to Earnings Ratio vs Industry May 7th 2025
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 A.D.Works GroupLtd's earnings, revenue and cash flow.

Is There Any Growth For A.D.Works GroupLtd?

The only time you'd be truly comfortable seeing a P/E as low as A.D.Works GroupLtd's is when the company's growth is on track to lag the market.

If we review the last year of earnings growth, the company posted a worthy increase of 12%. This was backed up an excellent period prior to see EPS up by 365% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 9.7% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that A.D.Works GroupLtd's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Key Takeaway

A.D.Works GroupLtd's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

We've established that A.D.Works GroupLtd currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for A.D.Works GroupLtd (1 is significant) 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.