Investors Appear Satisfied With Acusensus Limited's (ASX:ACE) Prospects As Shares Rocket 25%

Acusensus Limited (ASX:ACE) shares have continued their recent momentum with a 25% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 41%.

Even after such a large jump in price, it's still not a stretch to say that Acusensus' price-to-sales (or "P/S") ratio of 2.9x right now seems quite "middle-of-the-road" compared to the Software industry in Australia, where the median P/S ratio is around 3.1x. 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 Acusensus

How Has Acusensus Performed Recently?

Acusensus could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Acusensus' Revenue Growth Trending?

Acusensus' 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.

If we review the last year of revenue growth, the company posted a terrific increase of 18%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 21% each year as estimated by the one analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 20% per annum, which is not materially different.

In light of this, it's understandable that Acusensus' P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Acusensus' P/S

Its shares have lifted substantially and now Acusensus' P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look at Acusensus' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Having said that, be aware Acusensus is showing 2 warning signs in our investment analysis, you should know about.

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.