Neolife SA (EPA:ALNLF) Stock Rockets 25% But Many Are Still Ignoring The Company

Neolife SA (EPA:ALNLF) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 52% share price drop in the last twelve months.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Neolife's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Professional Services industry in France is also close to 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Neolife

How Neolife Has Been Performing

Revenue has risen firmly for Neolife recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Although there are no analyst estimates available for Neolife, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Neolife's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Neolife's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 20% gain to the company's top line. Pleasingly, revenue has also lifted 54% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 6.8%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Neolife is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Its shares have lifted substantially and now Neolife's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Neolife currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Neolife you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.