Why Investors Shouldn't Be Surprised By Doppler S.A.'s (ATH:DOPPLER) 29% Share Price Surge

Despite an already strong run, Doppler S.A. (ATH:DOPPLER) shares have been powering on, with a gain of 29% in the last thirty days. The last 30 days bring the annual gain to a very sharp 77%.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Doppler's P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in Greece is also close to 0.9x. 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.

View our latest analysis for Doppler

What Does Doppler's Recent Performance Look Like?

Revenue has risen at a steady rate over the last year for Doppler, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. Those who are bullish on Doppler 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 Doppler's earnings, revenue and cash flow.

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

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

Retrospectively, the last year delivered a decent 5.6% gain to the company's revenues. Revenue has also lifted 14% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

It's interesting to note that the rest of the industry is similarly expected to grow by 3.4% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we can see why Doppler is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Final Word

Its shares have lifted substantially and now Doppler's P/S is back within range of the industry median. 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.

It appears to us that Doppler maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Given the current circumstances, it seems improbable that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Doppler (2 don't sit too well with us!) that you should be aware of before investing here.

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.