Revenues Tell The Story For SSH Communications Security Oyj (HEL:SSH1V) As Its Stock Soars 55%

SSH Communications Security Oyj (HEL:SSH1V) shareholders have had their patience rewarded with a 55% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 38%.

Since its price has surged higher, when almost half of the companies in Finland's Software industry have price-to-sales ratios (or "P/S") below 2.1x, you may consider SSH Communications Security Oyj as a stock probably not worth researching with its 3.1x 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.

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Check out our latest analysis for SSH Communications Security Oyj

How Has SSH Communications Security Oyj Performed Recently?

There hasn't been much to differentiate SSH Communications Security Oyj's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on SSH Communications Security Oyj.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, SSH Communications Security Oyj would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.9% last year. The solid recent performance means it was also able to grow revenue by 27% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 15% over the next year. That's shaping up to be materially higher than the 10% growth forecast for the broader industry.

With this in mind, it's not hard to understand why SSH Communications Security Oyj's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does SSH Communications Security Oyj's P/S Mean For Investors?

SSH Communications Security Oyj shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 SSH Communications Security 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware SSH Communications Security Oyj is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.