Digital Workforce Services Oyj's (HEL:DWF) P/S Is Still On The Mark Following 28% Share Price Bounce

Digital Workforce Services Oyj (HEL:DWF) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 22% in the last twelve months.

Since its price has surged higher, given close to half the companies operating in Finland's IT industry have price-to-sales ratios (or "P/S") below 0.8x, you may consider Digital Workforce Services Oyj as a stock to potentially avoid with its 1.6x 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 as high as it is.

See our latest analysis for Digital Workforce Services Oyj

How Digital Workforce Services Oyj Has Been Performing

Digital Workforce Services 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 the poor revenue to reverse, justifying it's current high P/S.. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Digital Workforce Services Oyj.

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

The only time you'd be truly comfortable seeing a P/S as high as Digital Workforce Services Oyj's is when the company's growth is on track to outshine the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.3%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 32% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 12% per year during the coming three years according to the dual analysts following the company. With the industry only predicted to deliver 4.4% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Digital Workforce Services Oyj's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Digital Workforce Services Oyj's P/S Mean For Investors?

The large bounce in Digital Workforce Services Oyj's shares has lifted the company's P/S handsomely. 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.

Our look into Digital Workforce Services Oyj shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Digital Workforce Services 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.

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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.