Market Might Still Lack Some Conviction On NIHON CHOUZAI Co.,Ltd. (TSE:3341) Even After 47% Share Price Boost

NIHON CHOUZAI Co.,Ltd. (TSE:3341) shareholders have had their patience rewarded with a 47% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 40%.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about NIHON CHOUZAILtd's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Consumer Retailing industry in Japan is about the same. 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.

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See our latest analysis for NIHON CHOUZAILtd

What Does NIHON CHOUZAILtd's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, NIHON CHOUZAILtd has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio 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.

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

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

Retrospectively, the last year delivered a decent 6.4% gain to the company's revenues. The latest three year period has also seen a 21% 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.

Looking ahead now, revenue is anticipated to climb by 6.1% per annum during the coming three years according to the two analysts following the company. With the industry only predicted to deliver 2.4% per annum, the company is positioned for a stronger revenue result.

In light of this, it's curious that NIHON CHOUZAILtd's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From NIHON CHOUZAILtd's P/S?

NIHON CHOUZAILtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Despite enticing revenue growth figures that outpace the industry, NIHON CHOUZAILtd's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You need to take note of risks, for example - NIHON CHOUZAILtd has 2 warning signs (and 1 which is concerning) we think you should know about.

If these risks are making you reconsider your opinion on NIHON CHOUZAILtd, 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.