KENKO Mayonnaise Co.,Ltd.'s (TSE:2915) P/S Is Still On The Mark Following 29% Share Price Bounce

The KENKO Mayonnaise Co.,Ltd. (TSE:2915) share price has done very well over the last month, posting an excellent gain of 29%. The last 30 days bring the annual gain to a very sharp 65%.

Although its price has surged higher, you could still be forgiven for feeling indifferent about KENKO MayonnaiseLtd's P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Food industry in Japan is also close to 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for KENKO MayonnaiseLtd

What Does KENKO MayonnaiseLtd's P/S Mean For Shareholders?

KENKO MayonnaiseLtd's revenue growth of late has been pretty similar to most other companies. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on KENKO MayonnaiseLtd will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

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

KENKO MayonnaiseLtd's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 7.9%. The latest three year period has also seen a 27% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next three years should generate growth of 1.9% each year as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 3.7% each year, which is not materially different.

With this in mind, it makes sense that KENKO MayonnaiseLtd's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does KENKO MayonnaiseLtd's P/S Mean For Investors?

Its shares have lifted substantially and now KENKO MayonnaiseLtd's P/S is back within range of the industry median. 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 seen that KENKO MayonnaiseLtd maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Before you settle on your opinion, we've discovered 1 warning sign for KENKO MayonnaiseLtd that you should be aware of.

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.