Investors Still Aren't Entirely Convinced By Harboes Bryggeri A/S' (CPH:HARB B) Revenues Despite 34% Price Jump

Despite an already strong run, Harboes Bryggeri A/S (CPH:HARB B) shares have been powering on, with a gain of 34% in the last thirty days. The last month tops off a massive increase of 141% in the last year.

Although its price has surged higher, when close to half the companies operating in Denmark's Beverage industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider Harboes Bryggeri as an enticing stock to check out with its 0.4x 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.

View 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. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Although there are no analyst estimates available for Harboes Bryggeri, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Harboes Bryggeri's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Harboes Bryggeri's to be considered reasonable.

Retrospectively, the last year delivered a decent 10% gain to the company's revenues. Pleasingly, revenue has also lifted 32% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 4.0%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's peculiar that Harboes Bryggeri's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

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

Our examination of Harboes Bryggeri revealed its three-year revenue trends aren't boosting its P/S anywhere near 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 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.

Before you settle on your opinion, we've discovered 1 warning sign for Harboes Bryggeri that you should be aware of.

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.