Sawai Group Holdings Co., Ltd. (TSE:4887) Stock Rockets 26% But Many Are Still Ignoring The Company
Sawai Group Holdings Co., Ltd. (TSE:4887) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Looking further back, the 15% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.
Even after such a large jump in price, Sawai Group Holdings may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.3x, since almost half of all companies in the Pharmaceuticals industry in Japan have P/S ratios greater than 2x and even P/S higher than 4x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Sawai Group Holdings
What Does Sawai Group Holdings' Recent Performance Look Like?
Recent times have been advantageous for Sawai Group Holdings as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Sawai Group Holdings.Is There Any Revenue Growth Forecasted For Sawai Group Holdings?
Sawai Group Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
Retrospectively, the last year delivered a decent 13% gain to the company's revenues. However, due to its less than impressive performance prior to this period, revenue growth is practically non-existent over the last three years overall. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.
Turning to the outlook, the next three years should generate growth of 4.8% per year as estimated by the nine analysts watching the company. That's shaping up to be similar to the 5.3% per year growth forecast for the broader industry.
With this in consideration, we find it intriguing that Sawai Group Holdings' P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
The Key Takeaway
Despite Sawai Group Holdings' share price climbing recently, its P/S still lags most other companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
It looks to us like the P/S figures for Sawai Group Holdings remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.
You should always think about risks. Case in point, we've spotted 4 warning signs for Sawai Group Holdings you should be aware of, and 2 of them are concerning.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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