Take Care Before Diving Into The Deep End On SBI Insurance Group Co., Ltd. (TSE:7326)

It's not a stretch to say that SBI Insurance Group Co., Ltd.'s (TSE:7326) price-to-sales (or "P/S") ratio of 0.3x right now seems quite "middle-of-the-road" for companies in the Insurance industry in Japan, where the median P/S ratio is around 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for SBI Insurance Group

How Has SBI Insurance Group Performed Recently?

SBI Insurance Group has been doing a good job lately as it's been growing revenue at a solid pace. 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 SBI Insurance Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on SBI Insurance Group will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For SBI Insurance Group?

SBI Insurance Group'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 14%. This was backed up an excellent period prior to see revenue up by 34% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

This is in contrast to the rest of the industry, which is expected to grow by 6.8% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that SBI Insurance Group'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.

The Final Word

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

To our surprise, SBI Insurance Group 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. 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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for SBI Insurance Group with six simple checks on some of these key factors.

If you're unsure about the strength of SBI Insurance Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.