After Leaping 26% Hybrid Software Group PLC (EBR:HYSG) Shares Are Not Flying Under The Radar

Hybrid Software Group PLC (EBR:HYSG) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking further back, the 23% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Since its price has surged higher, when almost half of the companies in Belgium's Software industry have price-to-sales ratios (or "P/S") below 2.1x, you may consider Hybrid Software Group as a stock probably not worth researching with its 2.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Hybrid Software Group

How Hybrid Software Group Has Been Performing

Hybrid Software Group could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. If not, then existing shareholders may be very 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 Hybrid Software Group.

What Are Revenue Growth Metrics Telling Us About The High P/S?

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

If we review the last year of revenue growth, the company posted a worthy increase of 3.9%. Pleasingly, revenue has also lifted 46% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 20% during the coming year according to the one analyst following the company. With the industry only predicted to deliver 12%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Hybrid Software Group'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.

What We Can Learn From Hybrid Software Group's P/S?

Hybrid Software Group's P/S is on the rise since its shares have risen strongly. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Hybrid Software Group shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Hybrid Software Group you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.