Investors Holding Back On T&D Holdings, Inc. (TSE:8795)

With a median price-to-sales (or "P/S") ratio of close to 0.8x in the Insurance industry in Japan, you could be forgiven for feeling indifferent about T&D Holdings, Inc.'s (TSE:8795) P/S ratio of 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for T&D Holdings

What Does T&D Holdings' Recent Performance Look Like?

T&D Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on T&D Holdings.

Is There Some Revenue Growth Forecasted For T&D Holdings?

There's an inherent assumption that a company should be matching the industry for P/S ratios like T&D Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 28%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 26% as estimated by the six analysts watching the company. That's shaping up to be materially higher than the 5.1% growth forecast for the broader industry.

With this in consideration, we find it intriguing that T&D Holdings' P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On T&D Holdings' P/S

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 T&D Holdings currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for T&D Holdings that you need to be mindful of.

If these risks are making you reconsider your opinion on T&D Holdings, 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.