Sentiment Still Eluding Tokyo Radiator Mfg.Co.,Ltd. (TSE:7235)

There wouldn't be many who think Tokyo Radiator Mfg.Co.,Ltd.'s (TSE:7235) price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S for the Auto Components industry in Japan is very similar. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Tokyo Radiator Mfg.Co.Ltd

How Has Tokyo Radiator Mfg.Co.Ltd Performed Recently?

Tokyo Radiator Mfg.Co.Ltd 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 Tokyo Radiator Mfg.Co.Ltd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

Tokyo Radiator Mfg.Co.Ltd'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.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.1% last year. The latest three year period has also seen a 28% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 4.0% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Tokyo Radiator Mfg.Co.Ltd is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Tokyo Radiator Mfg.Co.Ltd's P/S?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Tokyo Radiator Mfg.Co.Ltd currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. 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.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Tokyo Radiator Mfg.Co.Ltd (1 makes us a bit uncomfortable!) that you need to be mindful of.

If these risks are making you reconsider your opinion on Tokyo Radiator Mfg.Co.Ltd, 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.

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