Intelligent Monitoring Group Limited's (ASX:IMB) P/S Is Still On The Mark Following 27% Share Price Bounce

Despite an already strong run, Intelligent Monitoring Group Limited (ASX:IMB) shares have been powering on, with a gain of 27% in the last thirty days. The last month tops off a massive increase of 179% in the last year.

Following the firm bounce in price, when almost half of the companies in Australia's Commercial Services industry have price-to-sales ratios (or "P/S") below 1.6x, you may consider Intelligent Monitoring Group as a stock probably not worth researching with its 2.1x 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 as high as it is.

Check out our latest analysis for Intelligent Monitoring Group

How Has Intelligent Monitoring Group Performed Recently?

With revenue growth that's exceedingly strong of late, Intelligent Monitoring Group has been doing very well. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Intelligent Monitoring Group will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Intelligent Monitoring Group?

Intelligent Monitoring Group's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 241% last year. The latest three year period has also seen an excellent 192% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 4.1%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in consideration, it's not hard to understand why Intelligent Monitoring Group's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

Intelligent Monitoring Group's P/S is on the rise since its shares have risen strongly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that Intelligent Monitoring Group can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

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

If these risks are making you reconsider your opinion on Intelligent Monitoring Group, 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.

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