A Piece Of The Puzzle Missing From Kromek Group plc's (LON:KMK) 36% Share Price Climb

The Kromek Group plc (LON:KMK) share price has done very well over the last month, posting an excellent gain of 36%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 13% in the last twelve months.

Although its price has surged higher, there still wouldn't be many who think Kromek Group's price-to-sales (or "P/S") ratio of 2.6x is worth a mention when the median P/S in the United Kingdom's Semiconductor industry is similar at about 2.5x. 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 Kromek Group

How Kromek Group Has Been Performing

Kromek Group could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Kromek Group will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Kromek Group would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 43% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 32% over the next year. That's shaping up to be materially higher than the 22% growth forecast for the broader industry.

In light of this, it's curious that Kromek Group's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Kromek Group's P/S?

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

We've established that Kromek Group currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you take the next step, you should know about the 5 warning signs for Kromek Group (1 shouldn't be ignored!) that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.