Investors Appear Satisfied With James Cropper PLC's (LON:CRPR) Prospects As Shares Rocket 29%

James Cropper PLC (LON:CRPR) shareholders have had their patience rewarded with a 29% share price jump in the last month. Notwithstanding the latest gain, the annual share price return of 6.9% isn't as impressive.

In spite of the firm bounce in price, it's still not a stretch to say that James Cropper's price-to-sales (or "P/S") ratio of 0.3x right now seems quite "middle-of-the-road" compared to the Forestry industry in the United Kingdom, where the median P/S ratio is around 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for James Cropper

How Has James Cropper Performed Recently?

James Cropper 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 might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

James Cropper's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 3.6% decrease to the company's top line. As a result, revenue from three years ago have also fallen 6.0% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 3.0% each year as estimated by the sole analyst watching the company. With the industry predicted to deliver 3.2% growth per year, the company is positioned for a comparable revenue result.

With this information, we can see why James Cropper 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.

What Does James Cropper's P/S Mean For Investors?

James Cropper's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

A James Cropper's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Forestry 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. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

It is also worth noting that we have found 1 warning sign for James Cropper that you need to take into consideration.

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.