Infomart Corporation (TSE:2492) Stocks Shoot Up 29% But Its P/S Still Looks Reasonable

Infomart Corporation (TSE:2492) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 13% is also fairly reasonable.

Following the firm bounce in price, when almost half of the companies in Japan's Professional Services industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Infomart as a stock not worth researching with its 5.2x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Our free stock report includes 2 warning signs investors should be aware of before investing in Infomart. Read for free now.

View our latest analysis for Infomart

How Has Infomart Performed Recently?

Recent times have been advantageous for Infomart as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Infomart?

The only time you'd be truly comfortable seeing a P/S as steep as Infomart's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. Pleasingly, revenue has also lifted 63% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 11% per annum during the coming three years according to the three analysts following the company. That's shaping up to be materially higher than the 9.4% per year growth forecast for the broader industry.

In light of this, it's understandable that Infomart's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Infomart's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Our look into Infomart shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Infomart (of which 1 is significant!) you should know about.

If you're unsure about the strength of Infomart'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.