KURADASHI.Co.,Ltd.'s (TSE:5884) 35% Cheaper Price Remains In Tune With Revenues

KURADASHI.Co.,Ltd. (TSE:5884) shareholders that were waiting for something to happen have been dealt a blow with a 35% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 68% loss during that time.

In spite of the heavy fall in price, given close to half the companies operating in Japan's Consumer Retailing industry have price-to-sales ratios (or "P/S") below 0.2x, you may still consider KURADASHI.Co.Ltd as a stock to potentially avoid with its 0.8x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for KURADASHI.Co.Ltd

What Does KURADASHI.Co.Ltd's Recent Performance Look Like?

KURADASHI.Co.Ltd has been doing a decent job lately as it's been growing revenue at a reasonable pace. Perhaps the market believes the recent revenue performance is strong enough to outperform the industry, which has inflated the P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on KURADASHI.Co.Ltd will help you shine a light on its historical performance.

How Is KURADASHI.Co.Ltd's Revenue Growth Trending?

KURADASHI.Co.Ltd's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered a decent 4.1% gain to the company's revenues. The latest three year period has also seen an excellent 123% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 4.7%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's understandable that KURADASHI.Co.Ltd's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

Despite the recent share price weakness, KURADASHI.Co.Ltd's P/S remains higher than most other companies in the industry. 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.

We've established that KURADASHI.Co.Ltd maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Having said that, be aware KURADASHI.Co.Ltd is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com