Cogna Educação S.A. (BVMF:COGN3) Stocks Shoot Up 32% But Its P/S Still Looks Reasonable

Despite an already strong run, Cogna Educação S.A. (BVMF:COGN3) shares have been powering on, with a gain of 32% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 46% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Cogna Educação's price-to-sales (or "P/S") ratio of 0.8x is worth a mention when the median P/S in Brazil's Consumer Services industry is similar at about 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

We've discovered 3 warning signs about Cogna Educação. View them for free.

See our latest analysis for Cogna Educação

How Has Cogna Educação Performed Recently?

Cogna Educação's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

Keen to find out how analysts think Cogna Educação's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Cogna Educação?

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

Retrospectively, the last year delivered a decent 7.5% gain to the company's revenues. The latest three year period has also seen an excellent 34% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 7.4% per annum as estimated by the twelve analysts watching the company. That's shaping up to be similar to the 6.6% per annum growth forecast for the broader industry.

With this in mind, it makes sense that Cogna Educação's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Cogna Educação's P/S?

Its shares have lifted substantially and now Cogna Educação's P/S is back within range of the industry median. 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.

A Cogna Educação's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Consumer Services industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Cogna Educação (1 is significant) you should be aware of.

If these risks are making you reconsider your opinion on Cogna Educação, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.