Positive Sentiment Still Eludes J Frontier Co.,Ltd. (TSE:2934) Following 26% Share Price Slump

The J Frontier Co.,Ltd. (TSE:2934) share price has fared very poorly over the last month, falling by a substantial 26%. The recent drop has obliterated the annual return, with the share price now down 9.9% over that longer period.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about J FrontierLtd's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Healthcare industry in Japan is also close to 0.5x. 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.

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See our latest analysis for J FrontierLtd

What Does J FrontierLtd's Recent Performance Look Like?

The revenue growth achieved at J FrontierLtd over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on J FrontierLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on J FrontierLtd's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For J FrontierLtd?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. The latest three year period has also seen a 23% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 4.3%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that J FrontierLtd is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Following J FrontierLtd's share price tumble, its P/S is just clinging on to the industry median P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To our surprise, J FrontierLtd revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. 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 3 warning signs for J FrontierLtd (1 is significant!) that we have uncovered.

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.