Aryt Industries Ltd. (TLV:ARYT) Stocks Shoot Up 32% But Its P/S Still Looks Reasonable

Despite an already strong run, Aryt Industries Ltd. (TLV:ARYT) shares have been powering on, with a gain of 32% in the last thirty days. This latest share price bounce rounds out a remarkable 822% gain over the last twelve months.

After such a large jump in price, given around half the companies in Israel's Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 3.8x, you may consider Aryt Industries as a stock to avoid entirely with its 17.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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View our latest analysis for Aryt Industries

What Does Aryt Industries' P/S Mean For Shareholders?

Recent times have been quite advantageous for Aryt Industries as its revenue has been rising very briskly. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Aryt Industries, 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 Aryt Industries?

The only time you'd be truly comfortable seeing a P/S as steep as Aryt Industries' is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 213%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 44%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we can see why Aryt Industries is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From Aryt Industries' P/S?

The strong share price surge has lead to Aryt Industries' P/S soaring as well. 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.

It's no surprise that Aryt Industries can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Aryt Industries you should know about.

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.