Even With A 26% Surge, Cautious Investors Are Not Rewarding Prodware S.A.'s (EPA:ALPRO) Performance Completely

Despite an already strong run, Prodware S.A. (EPA:ALPRO) shares have been powering on, with a gain of 26% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 53% in the last year.

Although its price has surged higher, given about half the companies operating in France's IT industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider Prodware as an attractive investment with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Prodware

What Does Prodware's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Prodware has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Prodware will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Prodware will help you shine a light on its historical performance.

How Is Prodware's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 181% gain to the company's top line. The latest three year period has also seen an excellent 249% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 2.2% shows it's noticeably more attractive.

In light of this, it's peculiar that Prodware's P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Despite Prodware's share price climbing recently, its P/S still lags most other companies. 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're very surprised to see Prodware currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

Plus, you should also learn about this 1 warning sign we've spotted with Prodware.

If you're unsure about the strength of Prodware's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.