Prashkovsky Investments and Construction Ltd.'s (TLV:PRSK) 29% Price Boost Is Out Of Tune With Revenues

The Prashkovsky Investments and Construction Ltd. (TLV:PRSK) share price has done very well over the last month, posting an excellent gain of 29%. The last 30 days bring the annual gain to a very sharp 53%.

In spite of the firm bounce in price, it's still not a stretch to say that Prashkovsky Investments and Construction's price-to-sales (or "P/S") ratio of 3.4x right now seems quite "middle-of-the-road" compared to the Real Estate industry in Israel, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for Prashkovsky Investments and Construction

How Has Prashkovsky Investments and Construction Performed Recently?

Recent times have been quite advantageous for Prashkovsky Investments and Construction as its revenue has been rising very briskly. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Prashkovsky Investments and Construction will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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?

The only time you'd be comfortable seeing a P/S like Prashkovsky Investments and Construction's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 71% gain to the company's top line. Still, revenue has fallen 36% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 10% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

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. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. 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.

The Bottom Line On Prashkovsky Investments and Construction's P/S

Prashkovsky Investments and Construction's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We find it unexpected that Prashkovsky Investments and Construction trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Prashkovsky Investments and Construction (2 shouldn't be ignored) you should be aware of.

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.