Further Upside For SKS Technologies Group Limited (ASX:SKS) Shares Could Introduce Price Risks After 31% Bounce

Despite an already strong run, SKS Technologies Group Limited (ASX:SKS) shares have been powering on, with a gain of 31% in the last thirty days. The last 30 days were the cherry on top of the stock's 707% gain in the last year, which is nothing short of spectacular.

Although its price has surged higher, you could still be forgiven for feeling indifferent about SKS Technologies Group's P/S ratio of 1.8x, since the median price-to-sales (or "P/S") ratio for the Electrical industry in Australia is about the same. 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.

Check out our latest analysis for SKS Technologies Group

What Does SKS Technologies Group's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, SKS Technologies Group has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on SKS Technologies Group.

Is There Some Revenue Growth Forecasted For SKS Technologies Group?

The only time you'd be comfortable seeing a P/S like SKS Technologies Group's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 64% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 283% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 33% per year as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 16% per annum growth forecast for the broader industry.

In light of this, it's curious that SKS Technologies Group's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On SKS Technologies Group's P/S

SKS Technologies Group's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that SKS Technologies Group currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for SKS Technologies Group that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.