Investors Appear Satisfied With Helios Faros d.d.'s (ZGSE:HEFA) Prospects As Shares Rocket 31%

Helios Faros d.d. (ZGSE:HEFA) shares have had a really impressive month, gaining 31% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 9.2% isn't as attractive.

Following the firm bounce in price, when almost half of the companies in Croatia's Hospitality industry have price-to-sales ratios (or "P/S") below 2.2x, you may consider Helios Faros d.d as a stock not worth researching with its 4.6x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Helios Faros d.d

How Has Helios Faros d.d Performed Recently?

Revenue has risen firmly for Helios Faros d.d recently, which is pleasing to see. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. If not, then existing shareholders may be a little nervous about the viability of the share price.

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 Helios Faros d.d's earnings, revenue and cash flow.

How Is Helios Faros d.d's Revenue Growth Trending?

Helios Faros d.d's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. Pleasingly, revenue has also lifted 197% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 9.3% shows it's noticeably more attractive.

With this information, we can see why Helios Faros d.d is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Bottom Line On Helios Faros d.d's P/S

Shares in Helios Faros d.d have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

As we suspected, our examination of Helios Faros d.d revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 4 warning signs for Helios Faros d.d (2 make us uncomfortable!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Helios Faros d.d, 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.