A Piece Of The Puzzle Missing From Pegasus Co., Ltd.'s (TSE:6262) 30% Share Price Climb

Despite an already strong run, Pegasus Co., Ltd. (TSE:6262) shares have been powering on, with a gain of 30% in the last thirty days. The last month tops off a massive increase of 103% in the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Pegasus' P/S ratio of 1x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in Japan is also close to 0.8x. 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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Check out our latest analysis for Pegasus

What Does Pegasus' P/S Mean For Shareholders?

Pegasus certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Pegasus.

How Is Pegasus' Revenue Growth Trending?

Pegasus' 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.

If we review the last year of revenue growth, the company posted a terrific increase of 20%. Still, revenue has fallen 5.3% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the sole analyst following the company. With the industry only predicted to deliver 4.7%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Pegasus' P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Pegasus' P/S?

Its shares have lifted substantially and now Pegasus' P/S is back within range of the industry median. 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.

Looking at Pegasus' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Having said that, be aware Pegasus is showing 2 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of Pegasus' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.