Further Upside For BATM Advanced Communications Ltd. (LON:BVC) Shares Could Introduce Price Risks After 27% Bounce

BATM Advanced Communications Ltd. (LON:BVC) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.

Although its price has surged higher, you could still be forgiven for feeling indifferent about BATM Advanced Communications' P/S ratio of 1x, since the median price-to-sales (or "P/S") ratio for the Communications industry in the United Kingdom is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for BATM Advanced Communications

How BATM Advanced Communications Has Been Performing

BATM Advanced Communications certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. It might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. Those who are bullish on BATM Advanced Communications will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

Keen to find out how analysts think BATM Advanced Communications' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For BATM Advanced Communications?

The only time you'd be comfortable seeing a P/S like BATM Advanced Communications' is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a worthy increase of 5.8%. Still, lamentably revenue has fallen 33% in aggregate from three years ago, which is disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 12% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 2.0% each year, which is noticeably less attractive.

With this information, we find it interesting that BATM Advanced Communications is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On BATM Advanced Communications' P/S

BATM Advanced Communications appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Looking at BATM Advanced Communications' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for BATM Advanced Communications with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on BATM Advanced Communications, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

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