Techno Horizon Co.,Ltd.'s (TSE:6629) 35% Jump Shows Its Popularity With Investors

Techno Horizon Co.,Ltd. (TSE:6629) shares have continued their recent momentum with a 35% gain in the last month alone. The annual gain comes to 102% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Techno HorizonLtd's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in Japan is also close to 0.7x. 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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View our latest analysis for Techno HorizonLtd

How Techno HorizonLtd Has Been Performing

We'd have to say that with no tangible growth over the last year, Techno HorizonLtd's revenue has been unimpressive. It might be that many expect the uninspiring revenue performance to only match most other companies at best over the coming period, which has kept the P/S from rising. If not, then existing shareholders may be feeling hopeful about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Techno HorizonLtd will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Techno HorizonLtd?

In order to justify its P/S ratio, Techno HorizonLtd would need to produce growth that's similar to the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period was better as it's delivered a decent 26% overall rise in revenue. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

It's interesting to note that the rest of the industry is similarly expected to grow by 6.5% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this in consideration, it's clear to see why Techno HorizonLtd's P/S matches up closely to its industry peers. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What We Can Learn From Techno HorizonLtd's P/S?

Techno HorizonLtd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

It appears to us that Techno HorizonLtd maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. With previous revenue trends that keep up with the current industry outlook, it's hard to justify the company's P/S ratio deviating much from it's current point. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Plus, you should also learn about these 6 warning signs we've spotted with Techno HorizonLtd (including 3 which are significant).

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.