Nippon Coke & Engineering Company, Limited (TSE:3315) Might Not Be As Mispriced As It Looks After Plunging 29%

The Nippon Coke & Engineering Company, Limited (TSE:3315) share price has fared very poorly over the last month, falling by a substantial 29%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 23% share price drop.

Even after such a large drop in price, there still wouldn't be many who think Nippon Coke & Engineering Company'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 Oil and Gas industry. 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.

View our latest analysis for Nippon Coke & Engineering Company

How Has Nippon Coke & Engineering Company Performed Recently?

As an illustration, revenue has deteriorated at Nippon Coke & Engineering Company over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Nippon Coke & Engineering Company will help you shine a light on its historical performance.

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

The only time you'd be comfortable seeing a P/S like Nippon Coke & Engineering Company's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 22%. Even so, admirably revenue has lifted 54% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 5.7% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Nippon Coke & Engineering Company's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What Does Nippon Coke & Engineering Company's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Nippon Coke & Engineering Company looks to be in line with the rest of the Oil and Gas industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Nippon Coke & Engineering Company currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Before you take the next step, you should know about the 4 warning signs for Nippon Coke & Engineering Company that we have uncovered.

If these risks are making you reconsider your opinion on Nippon Coke & Engineering Company, 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.

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