Ion Beam Applications SA (EBR:IBAB) Shares Fly 25% But Investors Aren't Buying For Growth

Ion Beam Applications SA (EBR:IBAB) shares have had a really impressive month, gaining 25% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 54%.

Even after such a large jump in price, Ion Beam Applications' price-to-sales (or "P/S") ratio of 0.9x might still make it look like a strong buy right now compared to the wider Medical Equipment industry in Belgium, where around half of the companies have P/S ratios above 3.8x and even P/S above 8x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Ion Beam Applications

How Has Ion Beam Applications Performed Recently?

Recent times have been advantageous for Ion Beam Applications as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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.

Want the full picture on analyst estimates for the company? Then our free report on Ion Beam Applications will help you uncover what's on the horizon.

How Is Ion Beam Applications' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Ion Beam Applications' is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 26%. The latest three year period has also seen an excellent 37% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 5.3% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 8.0% per annum, which is noticeably more attractive.

With this information, we can see why Ion Beam Applications is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Even after such a strong price move, Ion Beam Applications' 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.

We've established that Ion Beam Applications maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Ion Beam Applications has 2 warning signs we think you should be aware of.

If you're unsure about the strength of Ion Beam Applications' 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.