Positive Sentiment Still Eludes Asahi Eito Holdings Co.,Ltd. (TSE:5341) Following 28% Share Price Slump

Unfortunately for some shareholders, the Asahi Eito Holdings Co.,Ltd. (TSE:5341) share price has dived 28% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 46% share price drop.

In spite of the heavy fall in price, there still wouldn't be many who think Asahi Eito HoldingsLtd's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in Japan's Building industry is similar at about 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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View our latest analysis for Asahi Eito HoldingsLtd

What Does Asahi Eito HoldingsLtd's Recent Performance Look Like?

The recent revenue growth at Asahi Eito HoldingsLtd would have to be considered satisfactory if not spectacular. 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 Asahi Eito HoldingsLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Asahi Eito HoldingsLtd?

The only time you'd be comfortable seeing a P/S like Asahi Eito HoldingsLtd's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.3% last year. Pleasingly, revenue has also lifted 108% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is only predicted to deliver 4.5% 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 Asahi Eito HoldingsLtd's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Asahi Eito HoldingsLtd's P/S Mean For Investors?

Following Asahi Eito HoldingsLtd's share price tumble, its P/S is just clinging on to the industry median P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To our surprise, Asahi Eito HoldingsLtd revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. 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.

It is also worth noting that we have found 3 warning signs for Asahi Eito HoldingsLtd (2 are significant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Asahi Eito HoldingsLtd, 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.