Market Cool On Emergency Assistance Japan Co., Ltd.'s (TSE:6063) Revenues Pushing Shares 27% Lower

Emergency Assistance Japan Co., Ltd. (TSE:6063) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 31% in that time.

In spite of the heavy fall in price, there still wouldn't be many who think Emergency Assistance Japan's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in Japan's Healthcare industry is similar at about 0.6x. 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 Emergency Assistance Japan

What Does Emergency Assistance Japan's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Emergency Assistance Japan over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Emergency Assistance Japan, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Emergency Assistance Japan's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Emergency Assistance Japan's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 52% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 39% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 6.8% shows it's noticeably more attractive.

In light of this, it's curious that Emergency Assistance Japan's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What We Can Learn From Emergency Assistance Japan's P/S?

Emergency Assistance Japan's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

We've established that Emergency Assistance Japan currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It is also worth noting that we have found 2 warning signs for Emergency Assistance Japan that you need to take into consideration.

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.

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