Ekopak NV (EBR:EKOP) Looks Just Right With A 27% Price Jump

Those holding Ekopak NV (EBR:EKOP) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 64% share price drop in the last twelve months.

Following the firm bounce in price, given close to half the companies operating in Belgium's Commercial Services industry have price-to-sales ratios (or "P/S") below 0.6x, you may consider Ekopak as a stock to potentially avoid with its 2.4x P/S ratio. 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 Ekopak

What Does Ekopak's Recent Performance Look Like?

Ekopak could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.

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

How Is Ekopak's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 32% decrease to the company's top line. Still, the latest three year period has seen an excellent 158% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 152% as estimated by the dual analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 4.4%, which is noticeably less attractive.

In light of this, it's understandable that Ekopak'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 Final Word

Ekopak's P/S is on the rise since its shares have risen strongly. 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 Ekopak's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 3 warning signs we've spotted with Ekopak (including 2 which can't be ignored).

If you're unsure about the strength of Ekopak'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.