Montana Aerospace AG (VTX:AERO) Soars 39% But It's A Story Of Risk Vs Reward

Montana Aerospace AG (VTX:AERO) shares have had a really impressive month, gaining 39% after a shaky period beforehand. Looking further back, the 19% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, Montana Aerospace's price-to-sales (or "P/S") ratio of 0.6x might still make it look like a buy right now compared to the Aerospace & Defense industry in Switzerland, where around half of the companies have P/S ratios above 1.5x and even P/S above 4x 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 Montana Aerospace

How Has Montana Aerospace Performed Recently?

Montana Aerospace certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Montana Aerospace's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. Pleasingly, revenue has also lifted 120% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 10% per annum as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 11% per year, which is not materially different.

In light of this, it's peculiar that Montana Aerospace's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Montana Aerospace's P/S Mean For Investors?

Montana Aerospace's stock price has surged recently, but its but its P/S still remains modest. 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.

It looks to us like the P/S figures for Montana Aerospace remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Montana Aerospace that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.