Some Konica Minolta, Inc. (TSE:4902) Shareholders Look For Exit As Shares Take 25% Pounding

Unfortunately for some shareholders, the Konica Minolta, Inc. (TSE:4902) 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 18% share price drop.

In spite of the heavy fall in price, it's still not a stretch to say that Konica Minolta's price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" compared to the Tech industry in Japan, where the median P/S ratio is around 0.6x. 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.

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See our latest analysis for Konica Minolta

How Has Konica Minolta Performed Recently?

Recent times haven't been great for Konica Minolta as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Konica Minolta will help you uncover what's on the horizon.

How Is Konica Minolta's Revenue Growth Trending?

Konica Minolta's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 3.2% gain to the company's revenues. The latest three year period has also seen an excellent 31% 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 ten analysts covering the company suggest revenue growth is heading into negative territory, declining 3.2% each year over the next three years. Meanwhile, the broader industry is forecast to expand by 2.7% each year, which paints a poor picture.

With this information, we find it concerning that Konica Minolta is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

What Does Konica Minolta's P/S Mean For Investors?

Following Konica Minolta's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

It appears that Konica Minolta currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Konica Minolta (1 is a bit unpleasant!) that you need to be mindful 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.