There's No Escaping Acumentis Group Limited's (ASX:ACU) Muted Revenues Despite A 25% Share Price Rise

The Acumentis Group Limited (ASX:ACU) share price has done very well over the last month, posting an excellent gain of 25%. Looking back a bit further, it's encouraging to see the stock is up 31% in the last year.

Even after such a large jump in price, Acumentis Group may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.4x, considering almost half of all companies in the Real Estate industry in Australia have P/S ratios greater than 4.3x and even P/S higher than 8x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Acumentis Group

What Does Acumentis Group's P/S Mean For Shareholders?

Acumentis Group has been doing a decent job lately as it's been growing revenue at a reasonable pace. One possibility is that the P/S ratio is low because investors think this good revenue growth might actually underperform the broader industry in the near future. 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 out of favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Acumentis Group's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

Acumentis Group's 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.

Taking a look back first, we see that the company managed to grow revenues by a handy 3.4% last year. The latest three year period has also seen a 28% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 15% shows it's noticeably less attractive.

In light of this, it's understandable that Acumentis Group's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

Even after such a strong price move, Acumentis Group's P/S still trails the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

In line with expectations, Acumentis Group maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 2 warning signs we've spotted with Acumentis Group.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.