Investors Appear Satisfied With McBride plc's (LON:MCB) Prospects As Shares Rocket 25%

McBride plc (LON:MCB) shares have had a really impressive month, gaining 25% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 83%.

Although its price has surged higher, it's still not a stretch to say that McBride's price-to-sales (or "P/S") ratio of 0.3x right now seems quite "middle-of-the-road" compared to the Household Products industry in the United Kingdom, where the median P/S ratio is around 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for McBride

What Does McBride's P/S Mean For Shareholders?

McBride 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 might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

How Is McBride's Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 5.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 37% in total over the last three years. 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 1.9% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 3.1% each year, which is not materially different.

With this information, we can see why McBride is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

McBride appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

We've seen that McBride maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You always need to take note of risks, for example - McBride has 2 warning signs we think you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.