After Leaping 25% GreenMobility A/S (CPH:GREENM) Shares Are Not Flying Under The Radar

Despite an already strong run, GreenMobility A/S (CPH:GREENM) shares have been powering on, with a gain of 25% in the last thirty days. The last month tops off a massive increase of 139% in the last year.

After such a large jump in price, you could be forgiven for thinking GreenMobility is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3x, considering almost half the companies in Denmark's Transportation industry have P/S ratios below 0.8x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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Check out our latest analysis for GreenMobility

How GreenMobility Has Been Performing

With revenue growth that's exceedingly strong of late, GreenMobility has been doing very well. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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 GreenMobility's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For GreenMobility?

GreenMobility's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 51% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 86% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 4.1% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that GreenMobility's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

Shares in GreenMobility have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

It's no surprise that GreenMobility can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 4 warning signs for GreenMobility (1 makes us a bit uncomfortable!) that we have uncovered.

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).

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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.