Optimistic Investors Push Exosens (EPA:EXENS) Shares Up 37% But Growth Is Lacking

Exosens (EPA:EXENS) shares have continued their recent momentum with a 37% gain in the last month alone. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Following the firm bounce in price, given around half the companies in France's Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider Exosens as a stock to avoid entirely with its 4x 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.

Check out our latest analysis for Exosens

What Does Exosens' Recent Performance Look Like?

Exosens certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the 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 Exosens.

How Is Exosens' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Exosens' is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 35% last year. The strong recent performance means it was also able to grow revenue by 137% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 12% per year as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 12% each year, which is not materially different.

In light of this, it's curious that Exosens' P/S sits above the majority of other companies. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

What Does Exosens' P/S Mean For Investors?

Exosens' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Analysts are forecasting Exosens' revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. A positive change is needed in order to justify the current price-to-sales ratio.

Before you take the next step, you should know about the 1 warning sign for Exosens that we have uncovered.

If these risks are making you reconsider your opinion on Exosens, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.