Market Participants Recognise WALLIX GROUP SA's (EPA:ALLIX) Revenues Pushing Shares 27% Higher

WALLIX GROUP SA (EPA:ALLIX) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. The last month tops off a massive increase of 197% in the last year.

Since its price has surged higher, when almost half of the companies in France's Software industry have price-to-sales ratios (or "P/S") below 2.9x, you may consider WALLIX GROUP as a stock probably not worth researching with its 4.4x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for WALLIX GROUP

What Does WALLIX GROUP's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, WALLIX GROUP has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on WALLIX GROUP.

Is There Enough Revenue Growth Forecasted For WALLIX GROUP?

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

Taking a look back first, we see that the company grew revenue by an impressive 17% last year. Pleasingly, revenue has also lifted 42% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 17% per year during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.3% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why WALLIX GROUP'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.

The Bottom Line On WALLIX GROUP's P/S

The large bounce in WALLIX GROUP's shares has lifted the company's P/S handsomely. 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.

We've established that WALLIX GROUP maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

We don't want to rain on the parade too much, but we did also find 1 warning sign for WALLIX GROUP that you need to be mindful of.

If these risks are making you reconsider your opinion on WALLIX GROUP, 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.