A Piece Of The Puzzle Missing From Wishpond Technologies Ltd.'s (CVE:WISH) 25% Share Price Climb

Wishpond Technologies Ltd. (CVE:WISH) shareholders have had their patience rewarded with a 25% share price jump in the last month. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

In spite of the firm bounce in price, Wishpond Technologies' price-to-sales (or "P/S") ratio of 1.5x might still make it look like a buy right now compared to the Software industry in Canada, where around half of the companies have P/S ratios above 3.3x and even P/S above 11x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Wishpond Technologies

What Does Wishpond Technologies' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Wishpond Technologies has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Wishpond Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Wishpond Technologies would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Pleasingly, revenue has also lifted 216% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 24% per year during the coming three years according to the six analysts following the company. With the industry only predicted to deliver 20% per annum, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Wishpond Technologies' P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Wishpond Technologies' P/S?

The latest share price surge wasn't enough to lift Wishpond Technologies' P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at Wishpond Technologies' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Wishpond Technologies (1 shouldn't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Wishpond Technologies, 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.