Cogna Educação S.A.'s (BVMF:COGN3) 26% Jump Shows Its Popularity With Investors

Cogna Educação S.A. (BVMF:COGN3) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 61% share price decline over the last year.

Although its price has surged higher, there still wouldn't be many who think Cogna Educação's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when it essentially matches the median P/S in Brazil's Consumer Services industry. 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.

View our latest analysis for Cogna Educação

What Does Cogna Educação's Recent Performance Look Like?

Cogna Educação certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

How Is Cogna Educação's Revenue Growth Trending?

Cogna Educação'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.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. Revenue has also lifted 28% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 6.7% each year during the coming three years according to the twelve analysts following the company. With the industry predicted to deliver 6.1% growth per year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that Cogna Educação's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Cogna Educação's P/S Mean For Investors?

Cogna Educação's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

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. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

Before you take the next step, you should know about the 1 warning sign for Cogna Educação that we have uncovered.

If you're unsure about the strength of Cogna Educação'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.