Slammed 27% CyberBuzz, Inc. (TSE:7069) Screens Well Here But There Might Be A Catch

CyberBuzz, Inc. (TSE:7069) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 61%, which is great even in a bull market.

Since its price has dipped substantially, considering around half the companies operating in Japan's Interactive Media and Services industry have price-to-sales ratios (or "P/S") above 1.7x, you may consider CyberBuzz as an solid investment opportunity with its 1.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for CyberBuzz

How CyberBuzz Has Been Performing

CyberBuzz 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 low because investors think this strong revenue performance might be less impressive moving forward. 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 CyberBuzz.

Is There Any Revenue Growth Forecasted For CyberBuzz?

The only time you'd be truly comfortable seeing a P/S as low as CyberBuzz's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 50% last year. Pleasingly, revenue has also lifted 146% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 18% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 9.4% each year, which is noticeably less attractive.

In light of this, it's peculiar that CyberBuzz's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

CyberBuzz's recently weak share price has pulled its P/S back below other Interactive Media and Services companies. 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 us, it seems CyberBuzz currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Plus, you should also learn about these 2 warning signs we've spotted with CyberBuzz (including 1 which is potentially serious).

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.