MINKABU THE INFONOID, Inc. (TSE:4436) Stock's 26% Dive Might Signal An Opportunity But It Requires Some Scrutiny

MINKABU THE INFONOID, Inc. (TSE:4436) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 51% share price decline.

Following the heavy fall in price, when close to half the companies operating in Japan's Capital Markets industry have price-to-sales ratios (or "P/S") above 2.1x, you may consider MINKABU THE INFONOID as an enticing stock to check out with its 1x 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 MINKABU THE INFONOID

What Does MINKABU THE INFONOID's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, MINKABU THE INFONOID has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think MINKABU THE INFONOID's future stacks up against the industry? In that case, our free report is a great place to start.

How Is MINKABU THE INFONOID's Revenue Growth Trending?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Although pleasingly revenue has lifted 95% in aggregate from three years ago, notwithstanding the last 12 months. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Looking ahead now, revenue is anticipated to climb by 17% per year during the coming three years according to the lone analyst following the company. With the industry only predicted to deliver 1.9% each year, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that MINKABU THE INFONOID's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does MINKABU THE INFONOID's P/S Mean For Investors?

The southerly movements of MINKABU THE INFONOID's shares means its P/S is now sitting at a pretty low level. 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.

MINKABU THE INFONOID's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider and we've discovered 4 warning signs for MINKABU THE INFONOID (3 are significant!) that you should be aware of before investing here.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.