Further Upside For Harboes Bryggeri A/S (CPH:HARB B) Shares Could Introduce Price Risks After 27% Bounce

Despite an already strong run, Harboes Bryggeri A/S (CPH:HARB B) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 285% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, considering around half the companies operating in Denmark's Beverage industry have price-to-sales ratios (or "P/S") above 1.4x, you may still consider Harboes Bryggeri as an solid investment opportunity with its 0.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Harboes Bryggeri

How Harboes Bryggeri Has Been Performing

Revenue has risen firmly for Harboes Bryggeri recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. 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.

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 Harboes Bryggeri's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

Harboes Bryggeri's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. Pleasingly, revenue has also lifted 37% 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.

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 in mind, we find it intriguing that Harboes Bryggeri's P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Harboes Bryggeri's P/S

The latest share price surge wasn't enough to lift Harboes Bryggeri's P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We're very surprised to see Harboes Bryggeri currently trading on a much 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 assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Plus, you should also learn about this 1 warning sign we've spotted with Harboes Bryggeri.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.