What You Can Learn From SoftBank Group Corp.'s (TSE:9984) P/S

There wouldn't be many who think SoftBank Group Corp.'s (TSE:9984) price-to-sales (or "P/S") ratio of 2.1x is worth a mention when the median P/S for the Wireless Telecom industry in Japan is similar at about 1.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for SoftBank Group

What Does SoftBank Group's P/S Mean For Shareholders?

There hasn't been much to differentiate SoftBank Group's and the industry's revenue growth lately. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For SoftBank Group?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 2.8% last year. Revenue has also lifted 20% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 4.4% per annum during the coming three years according to the analysts following the company. That's shaping up to be similar to the 6.2% per annum growth forecast for the broader industry.

In light of this, it's understandable that SoftBank Group's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From SoftBank Group's P/S?

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.

A SoftBank Group's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Wireless Telecom industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Having said that, be aware SoftBank Group is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of SoftBank Group'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.