Investors Continue Waiting On Sidelines For Wilson Learning Worldwide Inc. (TSE:9610)

When you see that almost half of the companies in the Professional Services industry in Japan have price-to-sales ratios (or "P/S") above 1.1x, Wilson Learning Worldwide Inc. (TSE:9610) looks to be giving off some buy signals with its 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Wilson Learning Worldwide

How Has Wilson Learning Worldwide Performed Recently?

The revenue growth achieved at Wilson Learning Worldwide over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Wilson Learning Worldwide's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 29% last year. The strong recent performance means it was also able to grow revenue by 52% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 6.3% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it odd that Wilson Learning Worldwide is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Wilson Learning Worldwide's P/S Mean For Investors?

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.

We're very surprised to see Wilson Learning Worldwide currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 2 warning signs for Wilson Learning Worldwide you should be aware of, and 1 of them doesn't sit too well with us.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.