A Piece Of The Puzzle Missing From Kakuyasu Group Co., Ltd.'s (TSE:7686) 28% Share Price Climb

Kakuyasu Group Co., Ltd. (TSE:7686) shareholders have had their patience rewarded with a 28% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 64%.

In spite of the firm bounce in price, there still wouldn't be many who think Kakuyasu Group's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when it essentially matches the median P/S in Japan's Consumer Retailing industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Kakuyasu Group

How Has Kakuyasu Group Performed Recently?

Kakuyasu Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Kakuyasu Group will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Kakuyasu Group?

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

If we review the last year of revenue growth, the company posted a terrific increase of 21%. The latest three year period has also seen an excellent 48% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 7.6% during the coming year according to the one analyst following the company. That's shaping up to be materially higher than the 3.5% growth forecast for the broader industry.

With this information, we find it interesting that Kakuyasu Group is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Kakuyasu Group's P/S Mean For Investors?

Kakuyasu Group's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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 Kakuyasu Group currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Plus, you should also learn about these 2 warning signs we've spotted with Kakuyasu Group.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.