Prashkovsky Investments and Construction Ltd.'s (TLV:PRSK) 28% Share Price Surge Not Quite Adding Up

The Prashkovsky Investments and Construction Ltd. (TLV:PRSK) share price has done very well over the last month, posting an excellent gain of 28%. Looking back a bit further, it's encouraging to see the stock is up 82% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Prashkovsky Investments and Construction's P/S ratio of 4.6x, since the median price-to-sales (or "P/S") ratio for the Real Estate industry in Israel is also close to 4.4x. 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.

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View our latest analysis for Prashkovsky Investments and Construction

How Prashkovsky Investments and Construction Has Been Performing

Recent times have been quite advantageous for Prashkovsky Investments and Construction as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Prashkovsky Investments and Construction will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Prashkovsky Investments and Construction?

Prashkovsky Investments and Construction's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 64% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 16% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Prashkovsky Investments and Construction's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What We Can Learn From Prashkovsky Investments and Construction's P/S?

Its shares have lifted substantially and now Prashkovsky Investments and Construction'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.

Our look at Prashkovsky Investments and Construction revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you settle on your opinion, we've discovered 4 warning signs for Prashkovsky Investments and Construction (2 are concerning!) that you should be aware of.

If these risks are making you reconsider your opinion on Prashkovsky Investments and Construction, 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.