Further Upside For 63 moons technologies limited (NSE:63MOONS) Shares Could Introduce Price Risks After 26% Bounce

63 moons technologies limited (NSE:63MOONS) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 42% in the last year.

Although its price has surged higher, there still wouldn't be many who think 63 moons technologies' price-to-sales (or "P/S") ratio of 4.8x is worth a mention when the median P/S in India's Software industry is similar at about 5.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for 63 moons technologies

How Has 63 moons technologies Performed Recently?

Revenue has risen firmly for 63 moons technologies recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on 63 moons technologies will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The P/S?

There's an inherent assumption that a company should be matching the industry for P/S ratios like 63 moons technologies' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 8.7%. The latest three year period has also seen an excellent 144% overall rise in revenue, aided somewhat by its short-term performance. 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 16%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that 63 moons technologies is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On 63 moons technologies' P/S

Its shares have lifted substantially and now 63 moons technologies' P/S is back within range of the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We didn't quite envision 63 moons technologies' P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for 63 moons technologies 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.