Investors Still Aren't Entirely Convinced By Hipermarc S.A.'s (SNSE:HIPERMARC) Revenues Despite 29% Price Jump

Hipermarc S.A. (SNSE:HIPERMARC) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. This latest share price bounce rounds out a remarkable 301% gain over the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Hipermarc's P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Consumer Retailing industry in Chile is also close to 0.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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View our latest analysis for Hipermarc

What Does Hipermarc's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Hipermarc has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. 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 not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Hipermarc's earnings, revenue and cash flow.

How Is Hipermarc's Revenue Growth Trending?

In order to justify its P/S ratio, Hipermarc would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 74%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 8.1%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Hipermarc is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Hipermarc's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

To our surprise, Hipermarc revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 4 warning signs for Hipermarc (1 is significant!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.