JanOne Inc.'s (NASDAQ:JAN) Share Price Boosted 153% But Its Business Prospects Need A Lift Too

JanOne Inc. (NASDAQ:JAN) shares have continued their recent momentum with a 153% gain in the last month alone. The last month tops off a massive increase of 131% in the last year.

Although its price has surged higher, JanOne's price-to-sales (or "P/S") ratio of 0.3x might still make it look like a buy right now compared to the Commercial Services industry in the United States, where around half of the companies have P/S ratios above 1.2x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for JanOne

What Does JanOne's P/S Mean For Shareholders?

Recent times have been quite advantageous for JanOne as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. Those who are bullish on JanOne will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Is There Any Revenue Growth Forecasted For JanOne?

The only time you'd be truly comfortable seeing a P/S as low as JanOne's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an explosive gain to the company's top line. Revenue has also lifted 9.6% in aggregate from three years ago, mostly thanks to the incredible last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth, although potentially wondering why there's so much variation in revenue growth.

Comparing that to the industry, which is predicted to deliver 8.2% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's understandable that JanOne's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

JanOne's stock price has surged recently, but its but its P/S still remains modest. 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.

In line with expectations, JanOne maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you settle on your opinion, we've discovered 5 warning signs for JanOne (1 is significant!) that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.