Investors Still Aren't Entirely Convinced By WindowMaster International A/S' (CPH:WMA) Revenues Despite 57% Price Jump

WindowMaster International A/S (CPH:WMA) shareholders have had their patience rewarded with a 57% share price jump in the last month. The last month tops off a massive increase of 140% in the last year.

Although its price has surged higher, it's still not a stretch to say that WindowMaster International's price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" compared to the Building industry in Denmark, where the median P/S ratio is around 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Our free stock report includes 2 warning signs investors should be aware of before investing in WindowMaster International. Read for free now.

View our latest analysis for WindowMaster International

How WindowMaster International Has Been Performing

Revenue has risen firmly for WindowMaster International recently, which is pleasing to see. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction 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 WindowMaster International's earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 24% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 39% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 4.2% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that WindowMaster International 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 Key Takeaway

WindowMaster International appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We didn't quite envision WindowMaster International's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for WindowMaster International you should be aware of.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.