Revenues Tell The Story For Micropole S.A. (EPA:ALMIC) As Its Stock Soars 31%

Despite an already strong run, Micropole S.A. (EPA:ALMIC) shares have been powering on, with a gain of 31% in the last thirty days. The last 30 days bring the annual gain to a very sharp 38%.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Micropole's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the IT industry in France is also close to 0.8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Micropole

How Has Micropole Performed Recently?

The recent revenue growth at Micropole would have to be considered satisfactory if not spectacular. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

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

How Is Micropole's Revenue Growth Trending?

In order to justify its P/S ratio, Micropole would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.6% last year. The solid recent performance means it was also able to grow revenue by 18% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 5.3% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Micropole's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Final Word

Micropole appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we've seen, Micropole's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Plus, you should also learn about these 2 warning signs we've spotted with Micropole (including 1 which is a bit concerning).

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.