A Piece Of The Puzzle Missing From Trace Group Hold PLC's (BUL:T57) 26% Share Price Climb

Trace Group Hold PLC (BUL:T57) shareholders have had their patience rewarded with a 26% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 30% in the last year.

Although its price has surged higher, there still wouldn't be many who think Trace Group Hold's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Bulgaria's Construction industry is similar at about 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Trace Group Hold

How Trace Group Hold Has Been Performing

Trace Group Hold certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Trace Group Hold will help you shine a light on its historical performance.

How Is Trace Group Hold's Revenue Growth Trending?

In order to justify its P/S ratio, Trace Group Hold would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 106%. The strong recent performance means it was also able to grow revenue by 39% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 6.5%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Trace Group Hold is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Its shares have lifted substantially and now Trace Group Hold's 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.

We didn't quite envision Trace Group Hold's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

It is also worth noting that we have found 5 warning signs for Trace Group Hold (3 shouldn't be ignored!) that you need to take into consideration.

If you're unsure about the strength of Trace Group Hold'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.