Chrysos Corporation Limited's (ASX:C79) P/S Is Still On The Mark Following 28% Share Price Bounce

Despite an already strong run, Chrysos Corporation Limited (ASX:C79) shares have been powering on, with a gain of 28% in the last thirty days. The annual gain comes to 109% following the latest surge, making investors sit up and take notice.

After such a large jump in price, when almost half of the companies in Australia's Commercial Services industry have price-to-sales ratios (or "P/S") below 1.7x, you may consider Chrysos as a stock not worth researching with its 23.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Chrysos

How Chrysos Has Been Performing

With revenue growth that's superior to most other companies of late, Chrysos has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Chrysos' Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 90% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 70% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 8.0% per year, which is noticeably less attractive.

In light of this, it's understandable that Chrysos' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Chrysos' P/S Mean For Investors?

The strong share price surge has lead to Chrysos' P/S soaring as well. 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.

As we suspected, our examination of Chrysos' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for Chrysos you should be aware of.

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

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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.