After Leaping 25% Skillcast Group plc (LON:SKL) Shares Are Not Flying Under The Radar

Despite an already strong run, Skillcast Group plc (LON:SKL) shares have been powering on, with a gain of 25% in the last thirty days. The last 30 days bring the annual gain to a very sharp 72%.

Since its price has surged higher, given close to half the companies operating in the United Kingdom's Consumer Services industry have price-to-sales ratios (or "P/S") below 1.8x, you may consider Skillcast Group as a stock to potentially avoid with its 2.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

View our latest analysis for Skillcast Group

How Skillcast Group Has Been Performing

Skillcast Group certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. It seems that many are expecting the company to continue defying the broader industry adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Skillcast Group's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 15%. Pleasingly, revenue has also lifted 55% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 21% during the coming year according to the lone analyst following the company. With the industry only predicted to deliver 1.4%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Skillcast Group'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 Bottom Line On Skillcast Group's P/S

The large bounce in Skillcast Group's shares has lifted the company's P/S handsomely. 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.

We've established that Skillcast Group maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Consumer Services industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 2 warning signs for Skillcast Group (1 is a bit concerning!) that you should be aware of.

If these risks are making you reconsider your opinion on Skillcast Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.