AI inside Inc. (TSE:4488) Stocks Pounded By 25% But Not Lagging Industry On Growth Or Pricing

Unfortunately for some shareholders, the AI inside Inc. (TSE:4488) share price has dived 25% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 15% share price drop.

Although its price has dipped substantially, when almost half of the companies in Japan's Software industry have price-to-sales ratios (or "P/S") below 2x, you may still consider AI inside as a stock not worth researching with its 4.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for AI inside

How AI inside Has Been Performing

Recent times haven't been great for AI inside as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. If not, then existing shareholders may be very nervous about the viability of the share price.

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

How Is AI inside's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like AI inside's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 8.9% overall drop in revenue. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 24% during the coming year according to the lone analyst following the company. With the industry only predicted to deliver 13%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that AI inside'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 We Can Learn From AI inside's P/S?

AI inside's shares may have suffered, but its P/S remains high. 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.

Our look into AI inside shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for AI inside that you should be aware of.

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.