Investors Give Access Co., Ltd. (TSE:4813) Shares A 26% Hiding

Unfortunately for some shareholders, the Access Co., Ltd. (TSE:4813) share price has dived 26% in the last thirty days, prolonging recent pain. Looking at the bigger picture, even after this poor month the stock is up 36% in the last year.

In spite of the heavy fall in price, there still wouldn't be many who think Access' price-to-sales (or "P/S") ratio of 2x is worth a mention when the median P/S in Japan's Software industry is similar at about 1.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Access

How Has Access Performed Recently?

Revenue has risen firmly for Access recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Access' earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Access' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. The strong recent performance means it was also able to grow revenue by 114% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 12%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Access is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Access' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Access currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

You should always think about risks. Case in point, we've spotted 1 warning sign for Access 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.