Kraken Robotics Inc.'s (CVE:PNG) 47% Jump Shows Its Popularity With Investors

Kraken Robotics Inc. (CVE:PNG) shares have continued their recent momentum with a 47% gain in the last month alone. This latest share price bounce rounds out a remarkable 431% gain over the last twelve months.

Since its price has surged higher, given around half the companies in Canada's Electronic industry have price-to-sales ratios (or "P/S") below 2.9x, you may consider Kraken Robotics as a stock to avoid entirely with its 6.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Kraken Robotics

What Does Kraken Robotics' P/S Mean For Shareholders?

Kraken Robotics certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Kraken Robotics' Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Kraken Robotics' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 117% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 22% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 11% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Kraken Robotics' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Kraken Robotics' P/S?

Shares in Kraken Robotics have seen a strong upwards swing lately, which has really helped boost its P/S figure. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Kraken Robotics' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Kraken Robotics (1 makes us a bit uncomfortable!) that we have uncovered.

If these risks are making you reconsider your opinion on Kraken Robotics, 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.