Kraken Robotics Inc.'s (CVE:PNG) P/S Is Still On The Mark Following 28% Share Price Bounce

Kraken Robotics Inc. (CVE:PNG) shares have continued their recent momentum with a 28% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 76%.

Since its price has surged higher, you could be forgiven for thinking Kraken Robotics is a stock not worth researching with a price-to-sales ratios (or "P/S") of 4.2x, considering almost half the companies in Canada's Electronic industry have P/S ratios below 2.6x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for Kraken Robotics

How Kraken Robotics Has Been Performing

With revenue growth that's inferior to most other companies of late, Kraken Robotics has been relatively sluggish. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Kraken Robotics would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.0% last year. Pleasingly, revenue has also lifted 240% 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.

Looking ahead now, revenue is anticipated to climb by 35% each year during the coming three years according to the three analysts following the company. That's shaping up to be materially higher than the 17% each year growth forecast for the broader industry.

With this in mind, it's not hard to understand why Kraken Robotics' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

Kraken Robotics' P/S is on the rise since its shares have risen strongly. 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.

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.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Kraken Robotics with six simple checks will allow you to discover any risks that could be an issue.

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.