Wishpond Technologies Ltd.'s (CVE:WISH) Price Is Right But Growth Is Lacking After Shares Rocket 33%

Those holding Wishpond Technologies Ltd. (CVE:WISH) shares would be relieved that the share price has rebounded 33% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 37% in the last twelve months.

Even after such a large jump in price, Wishpond Technologies may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Software industry in Canada have P/S ratios greater than 3.8x and even P/S higher than 10x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Wishpond Technologies

How Wishpond Technologies Has Been Performing

Recent times haven't been great for Wishpond Technologies as its revenue has been rising slower than most other companies. 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.

Is There Any Revenue Growth Forecasted For Wishpond Technologies?

The only time you'd be truly comfortable seeing a P/S as depressed as Wishpond Technologies' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a decent 4.6% gain to the company's revenues. Pleasingly, revenue has also lifted 126% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 12% over the next year. Meanwhile, the rest of the industry is forecast to expand by 20%, which is noticeably more attractive.

With this in consideration, its clear as to why Wishpond Technologies' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

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

Wishpond Technologies' recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

As we suspected, our examination of Wishpond Technologies' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

It is also worth noting that we have found 1 warning sign for Wishpond Technologies that you need to take into consideration.

If you're unsure about the strength of Wishpond Technologies' 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.