Aspermont Limited (ASX:ASP) Stocks Shoot Up 33% But Its P/S Still Looks Reasonable

Aspermont Limited (ASX:ASP) shareholders have had their patience rewarded with a 33% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 11% in the last twelve months.

Following the firm bounce in price, you could be forgiven for thinking Aspermont is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.2x, considering almost half the companies in Australia's Media industry have P/S ratios below 0.7x. 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.

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View our latest analysis for Aspermont

What Does Aspermont's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Aspermont's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Aspermont will help you uncover what's on the horizon.

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

There's an inherent assumption that a company should outperform the industry for P/S ratios like Aspermont's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.1%. This means it has also seen a slide in revenue over the longer-term as revenue is down 10% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 20% per year as estimated by the lone analyst watching the company. With the industry only predicted to deliver 2.6% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Aspermont's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Aspermont's P/S

Aspermont's P/S is on the rise since its shares have risen strongly. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Aspermont maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Media industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Aspermont (at least 2 which are a bit unpleasant), and understanding these should be part of your investment process.

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.