There's No Escaping TPXimpact Holdings plc's (LON:TPX) Muted Revenues Despite A 26% Share Price Rise

Those holding TPXimpact Holdings plc (LON:TPX) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 26% over that time.

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 TPXimpact Holdings as an enticing stock to check out with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Our free stock report includes 3 warning signs investors should be aware of before investing in TPXimpact Holdings. Read for free now.

See our latest analysis for TPXimpact Holdings

How Has TPXimpact Holdings Performed Recently?

TPXimpact Holdings' revenue growth of late has been pretty similar to most other companies. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as TPXimpact Holdings' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 4.1% gain to the company's revenues. The latest three year period has also seen a 21% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 0.4% during the coming year according to the dual analysts following the company. With the industry predicted to deliver 7.7% growth, that's a disappointing outcome.

In light of this, it's understandable that TPXimpact Holdings' P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Final Word

The latest share price surge wasn't enough to lift TPXimpact Holdings' P/S close to the industry median. 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.

It's clear to see that TPXimpact Holdings maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 3 warning signs for TPXimpact Holdings (1 is concerning!) that you need to be mindful of.

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.