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What Hisamitsu Pharmaceutical Co., Inc.'s (TSE:4530) 25% Share Price Gain Is Not Telling You

Simply Wall St · 3d ago

Hisamitsu Pharmaceutical Co., Inc. (TSE:4530) shareholders have had their patience rewarded with a 25% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 28%.

Following the firm bounce in price, given around half the companies in Japan have price-to-earnings ratios (or "P/E's") below 14x, you may consider Hisamitsu Pharmaceutical as a stock to potentially avoid with its 18.5x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

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With earnings growth that's superior to most other companies of late, Hisamitsu Pharmaceutical has been doing relatively well. It seems that many are expecting the strong earnings performance to persist, which has raised the P/E. If not, then existing shareholders might be a little nervous about the viability of the share price.

See our latest analysis for Hisamitsu Pharmaceutical

pe-multiple-vs-industry
TSE:4530 Price to Earnings Ratio vs Industry January 6th 2026
Want the full picture on analyst estimates for the company? Then our free report on Hisamitsu Pharmaceutical will help you uncover what's on the horizon.

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as high as Hisamitsu Pharmaceutical's is when the company's growth is on track to outshine the market.

Retrospectively, the last year delivered an exceptional 39% gain to the company's bottom line. The latest three year period has also seen an excellent 102% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest earnings growth is heading into negative territory, declining 1.1% per year over the next three years. That's not great when the rest of the market is expected to grow by 9.0% per year.

In light of this, it's alarming that Hisamitsu Pharmaceutical's P/E sits above the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as these declining earnings are likely to weigh heavily on the share price eventually.

What We Can Learn From Hisamitsu Pharmaceutical's P/E?

The large bounce in Hisamitsu Pharmaceutical's shares has lifted the company's P/E to a fairly high level. 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.

Our examination of Hisamitsu Pharmaceutical's analyst forecasts revealed that its outlook for shrinking earnings isn't impacting its high P/E anywhere near as much as we would have predicted. Right now we are increasingly uncomfortable with the high P/E as the predicted future earnings are highly unlikely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Hisamitsu Pharmaceutical with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Hisamitsu Pharmaceutical's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.