Beeks Financial Cloud Group plc's (LON:BKS) P/S Is Still On The Mark Following 40% Share Price Bounce

The Beeks Financial Cloud Group plc (LON:BKS) share price has done very well over the last month, posting an excellent gain of 40%. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 3.4% in the last twelve months.

After such a large jump in price, given around half the companies in the United Kingdom's IT industry have price-to-sales ratios (or "P/S") below 1.3x, you may consider Beeks Financial Cloud Group as a stock to avoid entirely with its 4.2x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Beeks Financial Cloud Group

How Has Beeks Financial Cloud Group Performed Recently?

Recent times have been advantageous for Beeks Financial Cloud Group as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. 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 Beeks Financial Cloud Group will help you uncover what's on the horizon.

How Is Beeks Financial Cloud Group's Revenue Growth Trending?

Beeks Financial Cloud Group's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 22%. The latest three year period has also seen an excellent 139% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 32% during the coming year according to the two analysts following the company. That's shaping up to be materially higher than the 4.7% growth forecast for the broader industry.

With this information, we can see why Beeks Financial Cloud Group is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Beeks Financial Cloud Group's P/S Mean For Investors?

Shares in Beeks Financial Cloud Group have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into Beeks Financial Cloud Group shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Beeks Financial Cloud Group that you should be aware of.

If these risks are making you reconsider your opinion on Beeks Financial Cloud 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.