Investors Still Aren't Entirely Convinced By SIMPAR S.A.'s (BVMF:SIMH3) Revenues Despite 28% Price Jump

Despite an already strong run, SIMPAR S.A. (BVMF:SIMH3) shares have been powering on, with a gain of 28% in the last thirty days. Unfortunately, despite the strong performance over the last month, the full year gain of 9.3% isn't as attractive.

Although its price has surged higher, given about half the companies operating in Brazil's Transportation industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider SIMPAR as an attractive investment with its 0.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for SIMPAR

How Has SIMPAR Performed Recently?

Recent times have been advantageous for SIMPAR as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Is There Any Revenue Growth Forecasted For SIMPAR?

SIMPAR's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. The latest three year period has also seen an excellent 170% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 12% per annum as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 11% each year, which is not materially different.

With this in consideration, we find it intriguing that SIMPAR's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does SIMPAR's P/S Mean For Investors?

The latest share price surge wasn't enough to lift SIMPAR's P/S close to 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've seen that SIMPAR currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with SIMPAR, and understanding them should be part of your investment process.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.