Market Participants Recognise Hydrogen-Refueling-Solutions SA's (EPA:ALHRS) Revenues Pushing Shares 31% Higher

Hydrogen-Refueling-Solutions SA (EPA:ALHRS) shares have had a really impressive month, gaining 31% after a shaky period beforehand. But the last month did very little to improve the 72% share price decline over the last year.

Since its price has surged higher, when almost half of the companies in France's Machinery industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Hydrogen-Refueling-Solutions as a stock probably not worth researching with its 2.6x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Hydrogen-Refueling-Solutions

How Has Hydrogen-Refueling-Solutions Performed Recently?

Hydrogen-Refueling-Solutions 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 Hydrogen-Refueling-Solutions.

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 Hydrogen-Refueling-Solutions' is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. Even so, admirably revenue has lifted 136% in aggregate from three years ago, notwithstanding the last 12 months. 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 30% each year during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 5.2% per year growth forecast for the broader industry.

In light of this, it's understandable that Hydrogen-Refueling-Solutions' 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.

The Bottom Line On Hydrogen-Refueling-Solutions' P/S

Hydrogen-Refueling-Solutions shares have taken a big step in a northerly direction, but its P/S is elevated as a result. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into Hydrogen-Refueling-Solutions shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Hydrogen-Refueling-Solutions (1 is significant!) that you should be aware of before investing here.

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).

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.