Take Care Before Jumping Onto Pole To Win Holdings, Inc. (TSE:3657) Even Though It's 32% Cheaper

Pole To Win Holdings, Inc. (TSE:3657) shareholders that were waiting for something to happen have been dealt a blow with a 32% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 38% in that time.

After such a large drop in price, when close to half the companies operating in Japan's IT industry have price-to-sales ratios (or "P/S") above 1x, you may consider Pole To Win Holdings as an enticing stock to check out with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Pole To Win Holdings

What Does Pole To Win Holdings' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Pole To Win Holdings has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Pole To Win Holdings will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Pole To Win Holdings would need to produce sluggish growth that's trailing the industry.

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 an excellent 52% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 5.3% over the next year. Meanwhile, the rest of the industry is forecast to expand by 7.2%, which is not materially different.

In light of this, it's peculiar that Pole To Win Holdings' P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Final Word

Pole To Win Holdings' P/S has taken a dip along with its share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Pole To Win Holdings' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 3 warning signs for Pole To Win Holdings (1 makes us a bit uncomfortable!) 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.