Investors Don't See Light At End Of Janison Education Group Limited's (ASX:JAN) Tunnel And Push Stock Down 30%

Unfortunately for some shareholders, the Janison Education Group Limited (ASX:JAN) share price has dived 30% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 26% in that time.

Following the heavy fall in price, Janison Education Group's price-to-sales (or "P/S") ratio of 1.8x might make it look like a buy right now compared to the Software industry in Australia, where around half of the companies have P/S ratios above 2.6x and even P/S above 6x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Janison Education Group

What Does Janison Education Group's P/S Mean For Shareholders?

Janison Education Group could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Janison Education Group will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Janison Education Group?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Janison Education Group's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. The latest three year period has also seen an excellent 88% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 15% per year as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 20% each year, which is noticeably more attractive.

With this information, we can see why Janison Education Group is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Janison Education Group's P/S

The southerly movements of Janison Education Group's shares means its P/S is now sitting at a pretty low level. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As expected, our analysis of Janison Education Group's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you settle on your opinion, we've discovered 2 warning signs for Janison Education Group that you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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