The Market Lifts Harboes Bryggeri A/S (CPH:HARB B) Shares 40% But It Can Do More

Despite an already strong run, Harboes Bryggeri A/S (CPH:HARB B) shares have been powering on, with a gain of 40% in the last thirty days. The last 30 days bring the annual gain to a very sharp 66%.

Even after such a large jump in price, when close to half the companies operating in Denmark's Beverage industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Harboes Bryggeri as an enticing stock to check out with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Harboes Bryggeri

How Has Harboes Bryggeri Performed Recently?

Revenue has risen firmly for Harboes Bryggeri recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. 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.

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.

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. Pleasingly, revenue has also lifted 32% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

When compared to the industry's one-year growth forecast of 3.4%, 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

Despite Harboes Bryggeri's share price climbing recently, its P/S still lags most other companies. 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.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Harboes Bryggeri that you need to be mindful 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.