The Market Lifts RTC Group plc (LON:RTC) Shares 28% But It Can Do More

Despite an already strong run, RTC Group plc (LON:RTC) shares have been powering on, with a gain of 28% in the last thirty days. The last 30 days were the cherry on top of the stock's 539% gain in the last year, which is nothing short of spectacular.

Even after such a large jump in price, RTC Group's price-to-sales (or "P/S") ratio of 0.2x might still make it look like a buy right now compared to the Professional Services industry in the United Kingdom, where around half of the companies have P/S ratios above 0.8x and even P/S above 3x are quite common. 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 RTC Group

What Does RTC Group's Recent Performance Look Like?

Recent times have been quite advantageous for RTC Group as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is RTC Group's Revenue Growth Trending?

RTC Group's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 37%. As a result, it also grew revenue by 21% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

It's interesting to note that the rest of the industry is similarly expected to grow by 5.9% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this in consideration, we find it intriguing that RTC Group's P/S falls short of its industry peers. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

What We Can Learn From RTC Group's P/S?

The latest share price surge wasn't enough to lift RTC Group's P/S close to the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of RTC Group revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

Plus, you should also learn about these 4 warning signs we've spotted with RTC Group (including 1 which is a bit concerning).

If you're unsure about the strength of RTC 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.