ikuyo Co.,Ltd. (TSE:7273) Looks Just Right With A 29% Price Jump

Despite an already strong run, ikuyo Co.,Ltd. (TSE:7273) shares have been powering on, with a gain of 29% in the last thirty days. This latest share price bounce rounds out a remarkable 352% gain over the last twelve months.

Since its price has surged higher, when almost half of the companies in Japan's Auto Components industry have price-to-sales ratios (or "P/S") below 0.4x, you may consider ikuyoLtd as a stock probably not worth researching with its 1x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for ikuyoLtd

What Does ikuyoLtd's Recent Performance Look Like?

Revenue has risen firmly for ikuyoLtd recently, which is pleasing to see. It might be that many expect the respectable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on ikuyoLtd's earnings, revenue and cash flow.

How Is ikuyoLtd's Revenue Growth Trending?

In order to justify its P/S ratio, ikuyoLtd would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. Pleasingly, revenue has also lifted 60% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 1.2%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in consideration, it's not hard to understand why ikuyoLtd's P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does ikuyoLtd's P/S Mean For Investors?

ikuyoLtd's P/S is on the rise since its shares have risen strongly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that ikuyoLtd can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with ikuyoLtd (including 2 which don't sit too well with us).

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.