Mpac Group plc (LON:MPAC) Stock Rockets 25% But Many Are Still Ignoring The Company

Despite an already strong run, Mpac Group plc (LON:MPAC) shares have been powering on, with a gain of 25% in the last thirty days. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 7.1% over the last year.

In spite of the firm bounce in price, considering around half the companies operating in the United Kingdom's Machinery industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Mpac Group as an solid investment opportunity with its 0.5x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Mpac Group

How Mpac Group Has Been Performing

Mpac Group hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Mpac Group's to be considered reasonable.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period was better as it's delivered a decent 25% overall rise in revenue. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 12% over the next year. With the industry only predicted to deliver 2.7%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Mpac Group's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Mpac Group's P/S

Mpac Group's stock price has surged recently, but its but its P/S still remains modest. 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.

To us, it seems Mpac Group currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with Mpac Group.

If you're unsure about the strength of Mpac Group'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.