XP Factory Plc (LON:XPF) Stock Rockets 26% But Many Are Still Ignoring The Company

Those holding XP Factory Plc (LON:XPF) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.5% in the last twelve months.

Although its price has surged higher, considering around half the companies operating in the United Kingdom's Hospitality industry have price-to-sales ratios (or "P/S") above 1x, you may still consider XP Factory as an solid investment opportunity with its 0.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for XP Factory

What Does XP Factory's P/S Mean For Shareholders?

Recent times have been advantageous for XP Factory as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Keen to find out how analysts think XP Factory's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For XP Factory?

XP Factory'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 26%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 13% each year during the coming three years according to the two analysts following the company. With the industry only predicted to deliver 6.7% each year, the company is positioned for a stronger revenue result.

With this information, we find it odd that XP Factory is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

Despite XP Factory's share price climbing recently, its P/S still lags most other companies. 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.

XP Factory's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for XP Factory you should be aware of.

If you're unsure about the strength of XP Factory'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.