Investors Interested In Japan Airport Terminal Co., Ltd.'s (TSE:9706) Revenues

When you see that almost half of the companies in the Infrastructure industry in Japan have price-to-sales ratios (or "P/S") below 0.5x, Japan Airport Terminal Co., Ltd. (TSE:9706) looks to be giving off strong sell signals with its 3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Japan Airport Terminal

How Japan Airport Terminal Has Been Performing

Recent times have been advantageous for Japan Airport Terminal 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. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Japan Airport Terminal's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Japan Airport Terminal's Revenue Growth Trending?

In order to justify its P/S ratio, Japan Airport Terminal would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 117%. Pleasingly, revenue has also lifted 128% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 28% as estimated by the six analysts watching the company. That's shaping up to be materially higher than the 17% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Japan Airport Terminal's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Japan Airport Terminal'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.

As we suspected, our examination of Japan Airport Terminal's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 1 warning sign for Japan Airport Terminal that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.