A Piece Of The Puzzle Missing From EcoUp Oyj's (HEL:ECOUP) 33% Share Price Climb

EcoUp Oyj (HEL:ECOUP) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 30% over that time.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about EcoUp Oyj's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Building industry in Finland is also close to 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for EcoUp Oyj

How Has EcoUp Oyj Performed Recently?

EcoUp Oyj could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think EcoUp Oyj's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like EcoUp Oyj's is when the company's growth is tracking the industry closely.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 14%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 17% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 14% per year during the coming three years according to the one analyst following the company. With the industry only predicted to deliver 4.3% each year, the company is positioned for a stronger revenue result.

With this information, we find it interesting that EcoUp Oyj is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On EcoUp Oyj's P/S

EcoUp Oyj's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Despite enticing revenue growth figures that outpace the industry, EcoUp Oyj's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for EcoUp Oyj (1 can't be ignored!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.