Janison Education Group Limited (ASX:JAN) Stock Catapults 26% Though Its Price And Business Still Lag The Industry

Janison Education Group Limited (ASX:JAN) shareholders have had their patience rewarded with a 26% share price jump in the last month. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 9.4% in the last twelve months.

Although its price has surged higher, Janison Education Group may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.4x, considering almost half of all companies in the Software industry in Australia have P/S ratios greater than 3x and even P/S higher than 8x aren't out of the ordinary. 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

How Janison Education Group Has Been Performing

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.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Janison Education Group's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 4.9%. Pleasingly, revenue has also lifted 43% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 3.2% per year over the next three years. That's shaping up to be materially lower than the 20% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Janison Education Group's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

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

Despite Janison Education Group's share price climbing recently, its P/S still lags most other companies. 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.

We've established that Janison Education Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you take the next step, you should know about the 3 warning signs for Janison Education Group that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.