Investors Appear Satisfied With Israel Land Development - Urban Renewal Ltd's (TLV:ILDR) Prospects As Shares Rocket 32%

The Israel Land Development - Urban Renewal Ltd (TLV:ILDR) share price has done very well over the last month, posting an excellent gain of 32%. The last 30 days bring the annual gain to a very sharp 67%.

After such a large jump in price, given around half the companies in Israel's Oil and Gas industry have price-to-sales ratios (or "P/S") below 1x, you may consider Israel Land Development - Urban Renewal as a stock to avoid entirely with its 7.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Israel Land Development - Urban Renewal

How Has Israel Land Development - Urban Renewal Performed Recently?

With revenue growth that's exceedingly strong of late, Israel Land Development - Urban Renewal has been doing very well. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

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 Israel Land Development - Urban Renewal's earnings, revenue and cash flow.

Do Revenue Forecasts Match The High P/S Ratio?

Israel Land Development - Urban Renewal'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's revenues underwent some rampant growth over the last 12 months. In spite of this unbelievable short-term growth, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to decline by 2.3% over the next year, which puts the company's recent medium-term positive growth rates in a good light for now.

In light of this, it's understandable that Israel Land Development - Urban Renewal's P/S sits above the majority of other companies. Investors are willing to pay more for a stock they hope will buck the trend of the broader industry going backwards. However, its current revenue trajectory will be very difficult to maintain against the headwinds other companies are facing at the moment.

What We Can Learn From Israel Land Development - Urban Renewal's P/S?

Shares in Israel Land Development - Urban Renewal have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

As detailed previously, the strength of Israel Land Development - Urban Renewal's recent revenue trends over the medium-term relative to a declining industry is part of the reason why it trades at a higher P/S than its industry counterparts. It could be said that investors feel this revenue growth will continue into the future, justifying a higher P/S ratio. However, it'd be fair to raise concerns over whether this level of revenue performance will continue given the harsh conditions facing the industry. Otherwise, it's hard to see the share price falling strongly in the near future if its revenue performance persists.

Plus, you should also learn about these 2 warning signs we've spotted with Israel Land Development - Urban Renewal.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.