Market Might Still Lack Some Conviction On Petards Group plc (LON:PEG) Even After 38% Share Price Boost

Petards Group plc (LON:PEG) shares have had a really impressive month, gaining 38% after a shaky period beforehand. Notwithstanding the latest gain, the annual share price return of 8.1% isn't as impressive.

Although its price has surged higher, considering about half the companies operating in the United Kingdom's Software industry have price-to-sales ratios (or "P/S") above 3.2x, you may still consider Petards Group as an great investment opportunity with its 0.4x 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 so limited.

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See our latest analysis for Petards Group

What Does Petards Group's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, Petards Group has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Petards Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Petards Group's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Petards Group?

The only time you'd be truly comfortable seeing a P/S as depressed as Petards Group's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 64%. Pleasingly, revenue has also lifted 36% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 9.8% shows it's about the same on an annualised basis.

With this information, we find it odd that Petards Group is trading at a P/S lower than the industry. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

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

Petards Group's recent share price jump still sees fails to bring its P/S alongside the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Petards Group revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. While recent

We don't want to rain on the parade too much, but we did also find 3 warning signs for Petards Group (2 are concerning!) that you need to be mindful of.

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.