Further Upside For Kovo+ Holdings Inc. (CVE:KOVO) Shares Could Introduce Price Risks After 50% Bounce

Kovo+ Holdings Inc. (CVE:KOVO) shares have continued their recent momentum with a 50% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.

Even after such a large jump in price, Kovo+ Holdings may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the Healthcare Services industry in Canada have P/S ratios greater than 10.1x and even P/S higher than 68x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Kovo+ Holdings

How Has Kovo+ Holdings Performed Recently?

Kovo+ Holdings has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. 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 out of 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 Kovo+ Holdings' earnings, revenue and cash flow.

How Is Kovo+ Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Kovo+ Holdings' to be considered reasonable.

Retrospectively, the last year delivered a decent 9.8% gain to the company's revenues. Pleasingly, revenue has also lifted 214% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 9.3% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's peculiar that Kovo+ Holdings' P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Key Takeaway

Even after such a strong price move, Kovo+ Holdings' P/S still trails the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Kovo+ Holdings revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 6 warning signs for Kovo+ Holdings that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.