ACSL Ltd.'s (TSE:6232) 48% Jump Shows Its Popularity With Investors

ACSL Ltd. (TSE:6232) shareholders have had their patience rewarded with a 48% share price jump in the last month. Taking a wider view, although not as strong as the last month, the full year gain of 11% is also fairly reasonable.

Since its price has surged higher, when almost half of the companies in Japan's Electronic industry have price-to-sales ratios (or "P/S") below 0.6x, you may consider ACSL as a stock not worth researching with its 7.5x 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 ACSL

How ACSL Has Been Performing

Recent times have been advantageous for ACSL as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is ACSL's Revenue Growth Trending?

ACSL'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 109% gain to the company's top line. The latest three year period has also seen an excellent 254% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 98% as estimated by the one analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 8.0%, which is noticeably less attractive.

With this information, we can see why ACSL is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

ACSL's P/S has grown nicely over the last month thanks to a handy boost in the share price. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into ACSL 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.

Having said that, be aware ACSL is showing 4 warning signs in our investment analysis, and 2 of those are potentially serious.

If you're unsure about the strength of ACSL's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.