A Piece Of The Puzzle Missing From Light Science Technologies Holdings Plc's (LON:LST) 27% Share Price Climb

Light Science Technologies Holdings Plc (LON:LST) shares have continued their recent momentum with a 27% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 52%.

Although its price has surged higher, it's still not a stretch to say that Light Science Technologies Holdings' price-to-sales (or "P/S") ratio of 1.1x right now seems quite "middle-of-the-road" compared to the Electronic industry in the United Kingdom, seeing as it matches the P/S ratio of the wider industry. 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 Light Science Technologies Holdings

How Light Science Technologies Holdings Has Been Performing

The revenue growth achieved at Light Science Technologies Holdings over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Light Science Technologies Holdings will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Light Science Technologies Holdings' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 29% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 63% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 6.7% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Light Science Technologies Holdings is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Key Takeaway

Light Science Technologies Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We didn't quite envision Light Science Technologies Holdings' P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

You should always think about risks. Case in point, we've spotted 2 warning signs for Light Science Technologies Holdings you should be aware of, and 1 of them is significant.

If you're unsure about the strength of Light Science Technologies Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.