Johnson Health Tech .Co., Ltd.'s (TWSE:1736) Share Price Boosted 26% But Its Business Prospects Need A Lift Too

Johnson Health Tech .Co., Ltd. (TWSE:1736) shares have continued their recent momentum with a 26% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 46%.

Even after such a large jump in price, considering around half the companies operating in Taiwan's Leisure industry have price-to-sales ratios (or "P/S") above 1.6x, you may still consider Johnson Health Tech .Co as an solid investment opportunity with its 0.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Johnson Health Tech .Co

How Has Johnson Health Tech .Co Performed Recently?

Recent times have been pleasing for Johnson Health Tech .Co as its revenue has risen in spite of the industry's average revenue going into reverse. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. Those who are bullish on Johnson Health Tech .Co will be hoping that this isn't the case and the company continues to beat out the industry.

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

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Johnson Health Tech .Co's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. As a result, it also grew revenue by 30% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 8.6% over the next year. That's shaping up to be materially lower than the 16% growth forecast for the broader industry.

In light of this, it's understandable that Johnson Health Tech .Co's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Johnson Health Tech .Co's P/S

Despite Johnson Health Tech .Co's share price climbing recently, its P/S still lags most other companies. 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.

We've established that Johnson Health Tech .Co maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Johnson Health Tech .Co.

If these risks are making you reconsider your opinion on Johnson Health Tech .Co, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

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