A Piece Of The Puzzle Missing From Sirma Group Holding AD's (BUL:SGH) 26% Share Price Climb

Sirma Group Holding AD (BUL:SGH) 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 34% in the last year.

Although its price has surged higher, there still wouldn't be many who think Sirma Group Holding AD's price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Bulgaria's IT industry is similar at about 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Sirma Group Holding AD

What Does Sirma Group Holding AD's Recent Performance Look Like?

Revenue has risen firmly for Sirma Group Holding AD recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. 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 not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Sirma Group Holding AD's earnings, revenue and cash flow.

How Is Sirma Group Holding AD's Revenue Growth Trending?

Sirma Group Holding AD's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 9.9%. This was backed up an excellent period prior to see revenue up by 52% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 6.6% shows it's noticeably more attractive.

With this information, we find it interesting that Sirma Group Holding AD 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 Sirma Group Holding AD's P/S is back within range of 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.

We've established that Sirma Group Holding AD currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you take the next step, you should know about the 3 warning signs for Sirma Group Holding AD (2 are significant!) that we have uncovered.

If you're unsure about the strength of Sirma Group Holding AD's 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.