Pullup Entertainment Société anonyme (EPA:ALPUL) Shares Fly 30% But Investors Aren't Buying For Growth

Pullup Entertainment Société anonyme (EPA:ALPUL) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 69% in the last year.

Even after such a large jump in price, given about half the companies operating in France's Entertainment industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider Pullup Entertainment Société anonyme as an attractive investment with its 0.5x 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 limited.

Our free stock report includes 4 warning signs investors should be aware of before investing in Pullup Entertainment Société anonyme. Read for free now.

See our latest analysis for Pullup Entertainment Société anonyme

How Pullup Entertainment Société anonyme Has Been Performing

Recent times have been pleasing for Pullup Entertainment Société anonyme as its revenue has risen in spite of the industry's average revenue going into reverse. It might be that many expect the strong revenue performance to degrade substantially, possibly more than the industry, which has repressed the P/S. Those who are bullish on Pullup Entertainment Société anonyme will be hoping that this isn't the case and the company continues to beat out the industry.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Pullup Entertainment Société anonyme.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Pullup Entertainment Société anonyme's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 58%. Pleasingly, revenue has also lifted 121% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue growth is heading into negative territory, declining 4.9% over the next year. Meanwhile, the broader industry is forecast to expand by 2.8%, which paints a poor picture.

With this in consideration, we find it intriguing that Pullup Entertainment Société anonyme's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Key Takeaway

Despite Pullup Entertainment Société anonyme's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Pullup Entertainment Société anonyme's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Pullup Entertainment Société anonyme's poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Pullup Entertainment Société anonyme (2 don't sit too well with us!) 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).

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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.