Further Upside For Animalcare Group plc (LON:ANCR) Shares Could Introduce Price Risks After 26% Bounce

Animalcare Group plc (LON:ANCR) shareholders have had their patience rewarded with a 26% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 28%.

In spite of the firm bounce in price, Animalcare Group's price-to-sales (or "P/S") ratio of 1.9x might still make it look like a buy right now compared to the Pharmaceuticals industry in the United Kingdom, where around half of the companies have P/S ratios above 3.4x and even P/S above 17x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Animalcare Group

What Does Animalcare Group's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Animalcare Group's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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.

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

How Is Animalcare Group's Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.3%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 7.5% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 9.1%, which is not materially different.

With this information, we find it odd that Animalcare Group is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Bottom Line On Animalcare Group's P/S

The latest share price surge wasn't enough to lift Animalcare Group's P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It looks to us like the P/S figures for Animalcare Group remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

It is also worth noting that we have found 2 warning signs for Animalcare Group that you need to take into consideration.

If these risks are making you reconsider your opinion on Animalcare 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.