Bittium Oyj's (HEL:BITTI) 53% Jump Shows Its Popularity With Investors

Despite an already strong run, Bittium Oyj (HEL:BITTI) shares have been powering on, with a gain of 53% in the last thirty days. The annual gain comes to 193% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, given around half the companies in Finland's Software industry have price-to-sales ratios (or "P/S") below 2.3x, you may consider Bittium Oyj as a stock to avoid entirely with its 7.8x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Bittium Oyj

What Does Bittium Oyj's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Bittium Oyj has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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How Is Bittium Oyj's Revenue Growth Trending?

In order to justify its P/S ratio, Bittium 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 16%. Still, revenue has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 23% per year over the next three years. That's shaping up to be materially higher than the 13% per year growth forecast for the broader industry.

In light of this, it's understandable that Bittium 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.

What Does Bittium Oyj's P/S Mean For Investors?

Bittium Oyj's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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 look into Bittium Oyj shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 1 warning sign for Bittium Oyj that you need to take into consideration.

If you're unsure about the strength of Bittium Oyj's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.