NITTAN Corporation (TSE:6493) Stock Rockets 25% But Many Are Still Ignoring The Company

Explore NITTAN's Fair Values from the Community and select yours

NITTAN Corporation (TSE:6493) shares have continued their recent momentum with a 25% gain in the last month alone. The annual gain comes to 105% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, there still wouldn't be many who think NITTAN's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when it essentially matches the median P/S in Japan's Auto Components industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for NITTAN

How Has NITTAN Performed Recently?

NITTAN has been doing a decent job lately as it's been growing revenue at a reasonable pace. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. 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 not quite in favour.

Although there are no analyst estimates available for NITTAN, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is NITTAN's Revenue Growth Trending?

NITTAN's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 3.9% gain to the company's revenues. The latest three year period has also seen an excellent 33% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 0.6% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that NITTAN's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From NITTAN's P/S?

NITTAN appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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 didn't quite envision NITTAN's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for NITTAN that you should be aware of.

If these risks are making you reconsider your opinion on NITTAN, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.