Market Might Still Lack Some Conviction On Light Science Technologies Holdings Plc (LON:LST) Even After 26% Share Price Boost

The Light Science Technologies Holdings Plc (LON:LST) share price has done very well over the last month, posting an excellent gain of 26%. Looking back a bit further, it's encouraging to see the stock is up 62% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Light Science Technologies Holdings' P/S ratio of 1.1x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in the United Kingdom is also close to 1.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Light Science Technologies Holdings

What Does Light Science Technologies Holdings' P/S Mean For Shareholders?

Light Science Technologies Holdings has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Light Science Technologies Holdings, 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 P/S Ratio?

The only time you'd be comfortable seeing a P/S like Light Science Technologies Holdings' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. This was backed up an excellent period prior to see revenue up by 43% 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 6.3% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Light Science Technologies Holdings' P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Light Science Technologies Holdings' P/S Mean For Investors?

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. 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.

We've established that Light Science Technologies Holdings currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 3 warning signs for Light Science Technologies Holdings (2 shouldn't be ignored!) that we have uncovered.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.