Revenues Tell The Story For Kelly Partners Group Holdings Limited (ASX:KPG) As Its Stock Soars 31%

Despite an already strong run, Kelly Partners Group Holdings Limited (ASX:KPG) shares have been powering on, with a gain of 31% in the last thirty days. The last month tops off a massive increase of 118% in the last year.

Following the firm bounce in price, when almost half of the companies in Australia's Professional Services industry have price-to-sales ratios (or "P/S") below 1.2x, you may consider Kelly Partners Group Holdings as a stock not worth researching with its 4.8x 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 Kelly Partners Group Holdings

How Has Kelly Partners Group Holdings Performed Recently?

The revenue growth achieved at Kelly Partners Group Holdings over the last year would be more than acceptable for most companies. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Although there are no analyst estimates available for Kelly Partners Group Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Kelly Partners Group Holdings?

Kelly Partners Group Holdings' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 28% gain to the company's top line. The latest three year period has also seen an excellent 119% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 7.8% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why Kelly Partners Group Holdings is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What Does Kelly Partners Group Holdings' P/S Mean For Investors?

Shares in Kelly Partners Group Holdings have seen a strong upwards swing lately, which has really helped boost its P/S figure. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Kelly Partners Group Holdings maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Kelly Partners Group Holdings (1 is a bit concerning!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.