Why Investors Shouldn't Be Surprised By Vitru Brasil Empreendimentos, Participações e Comércio S.A.'s (BVMF:VTRU3) 28% Share Price Surge

Vitru Brasil Empreendimentos, Participações e Comércio S.A. (BVMF:VTRU3) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Looking further back, the 17% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, it's still not a stretch to say that Vitru Brasil Empreendimentos Participações e Comércio's price-to-sales (or "P/S") ratio of 0.7x right now seems quite "middle-of-the-road" compared to the Consumer Services industry in Brazil, where the median P/S ratio is around 0.6x. 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.

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See our latest analysis for Vitru Brasil Empreendimentos Participações e Comércio

How Vitru Brasil Empreendimentos Participações e Comércio Has Been Performing

There hasn't been much to differentiate Vitru Brasil Empreendimentos Participações e Comércio's and the industry's revenue growth lately. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. 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 Vitru Brasil Empreendimentos Participações e Comércio's future stacks up against the industry? In that case, our free report is a great place to start.

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

Vitru Brasil Empreendimentos Participações e Comércio'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.

Retrospectively, the last year delivered a decent 6.5% gain to the company's revenues. Pleasingly, revenue has also lifted 177% 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 done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 6.5% as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 7.6%, which is not materially different.

With this in mind, it makes sense that Vitru Brasil Empreendimentos Participações e Comércio's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

Vitru Brasil Empreendimentos Participações e Comércio's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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've seen that Vitru Brasil Empreendimentos Participações e Comércio maintains an adequate P/S seeing as its revenue growth figures match the rest of the 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. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Before you take the next step, you should know about the 3 warning signs for Vitru Brasil Empreendimentos Participações e Comércio (2 are a bit unpleasant!) that we have uncovered.

If these risks are making you reconsider your opinion on Vitru Brasil Empreendimentos Participações e Comércio, 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.