Even With A 35% Surge, Cautious Investors Are Not Rewarding Betmakers Technology Group Ltd's (ASX:BET) Performance Completely

Betmakers Technology Group Ltd (ASX:BET) shareholders have had their patience rewarded with a 35% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 38%.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Betmakers Technology Group's P/S ratio of 1.2x, since the median price-to-sales (or "P/S") ratio for the Hospitality industry in Australia is also close to 1.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Betmakers Technology Group

What Does Betmakers Technology Group's Recent Performance Look Like?

It looks like revenue growth has deserted Betmakers Technology Group recently, which is not something to boast about. It might be that many expect the uninspiring revenue performance to only match most other companies at best over the coming period, which has kept the P/S 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.

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

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Betmakers Technology Group's to be considered reasonable.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. The latest three year period has seen an incredible overall rise in revenue, in spite of this mediocre revenue growth of late. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it has slowed to such an extent.

This is in contrast to the rest of the industry, which is expected to grow by 3.5% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Betmakers Technology Group is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Its shares have lifted substantially and now Betmakers Technology Group's P/S is back within range of the industry median. 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.

To our surprise, Betmakers Technology Group revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Plus, you should also learn about these 3 warning signs we've spotted with Betmakers Technology Group (including 1 which is significant).

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.