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Nihon Seimitsu Co., Ltd.'s (TSE:7771) 42% Share Price Surge Not Quite Adding Up

Simply Wall St · 6d ago

Nihon Seimitsu Co., Ltd. (TSE:7771) shares have had a really impressive month, gaining 42% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 68% in the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Nihon Seimitsu's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in Japan's Luxury industry is similar at about 0.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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Check out our latest analysis for Nihon Seimitsu

ps-multiple-vs-industry
TSE:7771 Price to Sales Ratio vs Industry January 5th 2026

What Does Nihon Seimitsu's Recent Performance Look Like?

It looks like revenue growth has deserted Nihon Seimitsu recently, which is not something to boast about. One possibility is that the P/S is moderate because investors think this benign revenue growth rate might not be enough to outperform the broader industry in the near future. If not, then existing shareholders may be feeling hopeful about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Nihon Seimitsu's earnings, revenue and cash flow.

How Is Nihon Seimitsu's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Nihon Seimitsu's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Regardless, revenue has managed to lift by a handy 11% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 11% shows it's noticeably less attractive.

In light of this, it's curious that Nihon Seimitsu'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 We Can Learn From Nihon Seimitsu's P/S?

Its shares have lifted substantially and now Nihon Seimitsu's P/S is back within range of the industry median. 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 examination of Nihon Seimitsu 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. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. 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.

You need to take note of risks, for example - Nihon Seimitsu has 3 warning signs (and 2 which are significant) we think you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).