There's No Escaping CloudCoCo Group plc's (LON:CLCO) Muted Revenues Despite A 42% Share Price Rise

Those holding CloudCoCo Group plc (LON:CLCO) shares would be relieved that the share price has rebounded 42% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 66% share price drop in the last twelve months.

Even after such a large jump in price, when close to half the companies operating in the United Kingdom's IT industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider CloudCoCo Group as an enticing stock to check out with its 0.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

We've discovered 3 warning signs about CloudCoCo Group. View them for free.

View our latest analysis for CloudCoCo Group

What Does CloudCoCo Group's Recent Performance Look Like?

Recent times have been quite advantageous for CloudCoCo Group as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Although there are no analyst estimates available for CloudCoCo Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 41% gain to the company's top line. Revenue has also lifted 7.8% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 7.6% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's understandable that CloudCoCo Group's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On CloudCoCo Group's P/S

The latest share price surge wasn't enough to lift CloudCoCo 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.

In line with expectations, CloudCoCo Group maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 3 warning signs for CloudCoCo Group you should know about.

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.