Even With A 25% Surge, Cautious Investors Are Not Rewarding Intelligent Monitoring Group Limited's (ASX:IMB) Performance Completely

Intelligent Monitoring Group Limited (ASX:IMB) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. Unfortunately, despite the strong performance over the last month, the full year gain of 6.7% isn't as attractive.

Although its price has surged higher, there still wouldn't be many who think Intelligent Monitoring Group's price-to-sales (or "P/S") ratio of 1.6x is worth a mention when the median P/S in Australia's Commercial Services industry is similar at about 1.8x. 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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Check out our latest analysis for Intelligent Monitoring Group

How Has Intelligent Monitoring Group Performed Recently?

Intelligent Monitoring Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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What Are Revenue Growth Metrics Telling Us About The P/S?

Intelligent Monitoring Group'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.

If we review the last year of revenue growth, the company posted a terrific increase of 115%. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% per year during the coming three years according to the three analysts following the company. With the industry only predicted to deliver 5.0% per year, the company is positioned for a stronger revenue result.

In light of this, it's curious that Intelligent Monitoring 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.

What Does Intelligent Monitoring Group's P/S Mean For Investors?

Intelligent Monitoring Group's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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.

Despite enticing revenue growth figures that outpace the industry, Intelligent Monitoring Group's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Intelligent Monitoring Group that you should be aware of.

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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.