In this current market environment, all stocks suffer P/E and P/S ratio contraction. Yes, it is not about whether YOJ has good potential going forwards but its that its valuation is well ahead of its current progress and that is the short to medium term risk. It has not done itself any favours by increasing its share base issuing excessive performance shares which I previously covered and you have a situation where its current mkt cap of $122m is still 3x more than it was in August last year.
Its market cap/sales or P/S is 275x which is very high. It means that the current sp has imputed significant revenue growth. At present sp, YOJ needs to generate an annual revenue of $12m to sustain a more reasonable P/S or mcap/sales of 10x. Even a well proven stock APX with strong revenue and profitable growth only has a P/S ratio of 5.6x.
YOJ Price at posting:
16.0¢ Sentiment: None Disclosure: Not Held
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