The Market Lifts Income Asset Management Group Limited (ASX:IAM) Shares 27% But It Can Do More

Income Asset Management Group Limited (ASX:IAM) shares have continued their recent momentum with a 27% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 46% over that time.

Even after such a large jump in price, there still wouldn't be many who think Income Asset Management Group's price-to-sales (or "P/S") ratio of 2.2x is worth a mention when the median P/S in Australia's Diversified Financial industry is similar at about 2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for Income Asset Management Group

How Income Asset Management Group Has Been Performing

Income Asset Management Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Income Asset Management Group's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

Income Asset Management 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.

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. Pleasingly, revenue has also lifted 156% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to remain buoyant, climbing by 22% during the coming year according to the only analyst following the company. That would be an excellent outcome when the industry is expected to decline by 26%.

In light of this, it's peculiar that Income Asset Management Group's P/S sits in-line with the majority of other companies. It looks like most investors aren't convinced the company can achieve positive future growth in the face of a shrinking broader industry.

What Does Income Asset Management Group's P/S Mean For Investors?

Income Asset Management Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Income Asset Management Group currently trades on a lower than expected P/S since its growth forecasts are potentially beating a struggling industry. Given the glowing revenue forecasts, we can only assume potential risks are what might be capping the P/S ratio at its current levels. Perhaps there is some hesitation about the company's ability to keep swimming against the current of the broader industry turmoil. It appears some are indeed anticipating revenue instability, because the company's current prospects should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Income Asset Management Group (1 is a bit unpleasant!) that you need to be mindful of.

If these risks are making you reconsider your opinion on Income Asset Management 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.