After Leaping 35% SAKURA Internet Inc. (TSE:3778) Shares Are Not Flying Under The Radar

Despite an already strong run, SAKURA Internet Inc. (TSE:3778) shares have been powering on, with a gain of 35% in the last thirty days. This latest share price bounce rounds out a remarkable 359% gain over the last twelve months.

Since its price has surged higher, given around half the companies in Japan's IT industry have price-to-sales ratios (or "P/S") below 1.1x, you may consider SAKURA Internet as a stock to avoid entirely with its 8.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for SAKURA Internet

How Has SAKURA Internet Performed Recently?

SAKURA Internet certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on SAKURA Internet.

Do Revenue Forecasts Match The High P/S Ratio?

SAKURA Internet's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. As a result, it also grew revenue by 17% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 46% during the coming year according to the lone analyst following the company. With the industry only predicted to deliver 6.7%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that SAKURA Internet's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does SAKURA Internet's P/S Mean For Investors?

Shares in SAKURA Internet have seen a strong upwards swing lately, which has really helped boost its P/S figure. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that SAKURA Internet maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the IT industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for SAKURA Internet (of which 1 is concerning!) you should know about.

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.