Dubber Corporation Limited (ASX:DUB) Stock Catapults 29% Though Its Price And Business Still Lag The Industry

Those holding Dubber Corporation Limited (ASX:DUB) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 51% share price decline over the last year.

In spite of the firm bounce in price, Dubber may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.4x, since almost half of all companies in the Software industry in Australia have P/S ratios greater than 3.3x and even P/S higher than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for Dubber

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

The revenue growth achieved at Dubber over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. 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.

Although there are no analyst estimates available for Dubber, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Dubber's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. The latest three year period has also seen an excellent 39% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 41% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Dubber is trading at a P/S lower than the industry. 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 Bottom Line On Dubber's P/S

The latest share price surge wasn't enough to lift Dubber's P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Dubber revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 4 warning signs for Dubber (3 shouldn't be ignored!) that you need to take into consideration.

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

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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.