Improved Revenues Required Before Trajan Group Holdings Limited (ASX:TRJ) Shares Find Their Feet

Trajan Group Holdings Limited's (ASX:TRJ) price-to-sales (or "P/S") ratio of 0.9x might make it look like a strong buy right now compared to the Life Sciences industry in Australia, where around half of the companies have P/S ratios above 4.8x and even P/S above 14x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for Trajan Group Holdings

What Does Trajan Group Holdings' Recent Performance Look Like?

Trajan Group Holdings certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Trajan Group Holdings.

How Is Trajan Group Holdings' Revenue Growth Trending?

Trajan Group Holdings' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Although pleasingly revenue has lifted 93% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Turning to the outlook, the next year should generate growth of 6.0% as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.5%, which is noticeably more attractive.

In light of this, it's understandable that Trajan Group Holdings' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

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

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.

As expected, our analysis of Trajan Group Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Having said that, be aware Trajan Group Holdings is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable.

If you're unsure about the strength of Trajan Group Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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

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.