SES-imagotag Société Anonyme's (EPA:SESL) P/S Is Still On The Mark Following 33% Share Price Bounce

SES-imagotag Société Anonyme (EPA:SESL) shares have had a really impressive month, gaining 33% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 8.4% isn't as attractive.

After such a large jump in price, you could be forgiven for thinking SES-imagotag Société Anonyme is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 2.9x, considering almost half the companies in France's Electronic industry have P/S ratios below 0.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for SES-imagotag Société Anonyme

How SES-imagotag Société Anonyme Has Been Performing

SES-imagotag Société Anonyme certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on SES-imagotag Société Anonyme will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For SES-imagotag Société Anonyme?

In order to justify its P/S ratio, SES-imagotag Société Anonyme would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered an exceptional 41% gain to the company's top line. The latest three year period has also seen an excellent 193% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 30% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 9.7% per annum, which is noticeably less attractive.

In light of this, it's understandable that SES-imagotag Société Anonyme's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The strong share price surge has lead to SES-imagotag Société Anonyme's P/S soaring as well. 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.

Our look into SES-imagotag Société Anonyme shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware SES-imagotag Société Anonyme is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored.

If you're unsure about the strength of SES-imagotag Société Anonyme'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.