Bittium Oyj's (HEL:BITTI) P/S Is Still On The Mark Following 26% Share Price Bounce

Bittium Oyj (HEL:BITTI) shares have continued their recent momentum with a 26% gain in the last month alone. The annual gain comes to 127% 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 2x, you may consider Bittium Oyj as a stock to avoid entirely with its 6x P/S ratio. 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 Bittium Oyj

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

Recent times have been advantageous for Bittium Oyj as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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Do Revenue Forecasts Match The High P/S Ratio?

Bittium Oyj'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.

If we review the last year of revenue growth, the company posted a terrific increase of 16%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 21% during the coming year according to the lone analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 12%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Bittium Oyj's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Bittium Oyj's P/S has grown nicely over the last month thanks to a handy boost in the share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Bittium Oyj maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. 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.

Before you take the next step, you should know about the 2 warning signs for Bittium Oyj that we have uncovered.

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.