Intrakat Société Anonyme Technical and Energy Projects' (ATH:INKAT) 26% Share Price Surge Not Quite Adding Up

Despite an already strong run, Intrakat Société Anonyme Technical and Energy Projects (ATH:INKAT) shares have been powering on, with a gain of 26% in the last thirty days. The annual gain comes to 197% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, when almost half of the companies in Greece's Construction industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Intrakat Société Anonyme Technical and Energy Projects as a stock probably not worth researching with its 2.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Intrakat Société Anonyme Technical and Energy Projects

What Does Intrakat Société Anonyme Technical and Energy Projects' P/S Mean For Shareholders?

Revenue has risen firmly for Intrakat Société Anonyme Technical and Energy Projects recently, which is pleasing to see. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.

Although there are no analyst estimates available for Intrakat Société Anonyme Technical and Energy Projects, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Intrakat Société Anonyme Technical and Energy Projects?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Intrakat Société Anonyme Technical and Energy Projects' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen a 10% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

It's interesting to note that the rest of the industry is similarly expected to grow by 4.7% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we find it interesting that Intrakat Société Anonyme Technical and Energy Projects is trading at a high P/S compared to the industry. Apparently many investors in the company are more bullish than recent times would indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as a continuation of recent revenue trends would weigh down the share price eventually.

The Key Takeaway

Intrakat Société Anonyme Technical and Energy Projects' P/S is on the rise since its shares have risen strongly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into Intrakat Société Anonyme Technical and Energy Projects has shown that it currently trades on a higher than expected P/S since its recent three-year growth is only in line with the wider industry forecast. When we see average revenue with industry-like growth combined with a high P/S, we suspect the share price is at risk of declining, bringing the P/S back in line with the industry too. Unless there is a significant improvement in the company's medium-term trends, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

You should always think about risks. Case in point, we've spotted 3 warning signs for Intrakat Société Anonyme Technical and Energy Projects you should be aware of.

If you're unsure about the strength of Intrakat Société Anonyme Technical and Energy Projects' 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.