Endomines Finland Oyj's (HEL:PAMPALO) 34% Jump Shows Its Popularity With Investors

Despite an already strong run, Endomines Finland Oyj (HEL:PAMPALO) shares have been powering on, with a gain of 34% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 76% in the last year.

After such a large jump in price, you could be forgiven for thinking Endomines Finland Oyj is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 5.1x, considering almost half the companies in Finland's Metals and Mining industry have P/S ratios below 0.7x. 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.

See our latest analysis for Endomines Finland Oyj

How Has Endomines Finland Oyj Performed Recently?

With revenue growth that's superior to most other companies of late, Endomines Finland Oyj has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Endomines Finland Oyj's Revenue Growth Trending?

In order to justify its P/S ratio, Endomines Finland Oyj would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 25% per year during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 3.6% each year, which is noticeably less attractive.

In light of this, it's understandable that Endomines Finland Oyj's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

The strong share price surge has lead to Endomines Finland Oyj's P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Endomines Finland Oyj maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Metals and Mining industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Endomines Finland Oyj that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.