Further Upside For Syncro Group AB (publ) (FRA:7PF) Shares Could Introduce Price Risks After 300% Bounce

Syncro Group AB (publ) (FRA:7PF) shareholders are no doubt pleased to see that the share price has bounced 300% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 56% share price decline over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Syncro Group's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in Germany's Electronic industry is similar at about 0.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Syncro Group

What Does Syncro Group's P/S Mean For Shareholders?

For instance, Syncro Group's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

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 Syncro Group's earnings, revenue and cash flow.

How Is Syncro Group's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Syncro Group's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.1%. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 14% shows it's noticeably more attractive.

With this information, we find it interesting that Syncro Group is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Syncro Group's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Syncro Group currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. 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.

You should always think about risks. Case in point, we've spotted 5 warning signs for Syncro Group you should be aware of.

If these risks are making you reconsider your opinion on Syncro Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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