Kraken Robotics Inc. (CVE:PNG) Stocks Shoot Up 35% But Its P/S Still Looks Reasonable

Kraken Robotics Inc. (CVE:PNG) shares have continued their recent momentum with a 35% gain in the last month alone. The last month tops off a massive increase of 164% in the last year.

Following the firm bounce in price, Kraken Robotics may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 15.5x, since almost half of all companies in the Electronic industry in Canada have P/S ratios under 4.2x and even P/S lower than 2x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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Check out our latest analysis for Kraken Robotics

How Has Kraken Robotics Performed Recently?

While the industry has experienced revenue growth lately, Kraken Robotics' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Kraken Robotics.

Is There Enough Revenue Growth Forecasted For Kraken Robotics?

Kraken Robotics' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 2.0%. Still, the latest three year period has seen an excellent 126% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 41% each year during the coming three years according to the seven analysts following the company. With the industry only predicted to deliver 14% each year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Kraken Robotics' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

The strong share price surge has lead to Kraken Robotics' P/S soaring as well. 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.

Our look into Kraken Robotics shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Kraken Robotics that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.