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What Nankai Plywood Co.,Ltd.'s (TSE:7887) 26% Share Price Gain Is Not Telling You

Simply Wall St · 1d ago

The Nankai Plywood Co.,Ltd. (TSE:7887) share price has done very well over the last month, posting an excellent gain of 26%. Looking back a bit further, it's encouraging to see the stock is up 79% in the last year.

Although its price has surged higher, there still wouldn't be many who think Nankai PlywoodLtd's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in Japan's Forestry industry is similar at about 0.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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View our latest analysis for Nankai PlywoodLtd

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TSE:7887 Price to Sales Ratio vs Industry December 24th 2025

How Nankai PlywoodLtd Has Been Performing

The revenue growth achieved at Nankai PlywoodLtd over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

Nankai PlywoodLtd's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.6% last year. Revenue has also lifted 12% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 12% 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 curious that Nankai PlywoodLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What Does Nankai PlywoodLtd's P/S Mean For Investors?

Nankai PlywoodLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Nankai PlywoodLtd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

Before you settle on your opinion, we've discovered 2 warning signs for Nankai PlywoodLtd (1 doesn't sit too well with us!) that you should be aware of.

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