Revenues Tell The Story For Aurum PropTech Limited (NSE:AURUM) As Its Stock Soars 27%

Despite an already strong run, Aurum PropTech Limited (NSE:AURUM) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days bring the annual gain to a very sharp 50%.

After such a large jump in price, Aurum PropTech may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 11.2x, since almost half of all companies in the Software industry in India have P/S ratios under 5.1x and even P/S lower than 2x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Aurum PropTech

What Does Aurum PropTech's Recent Performance Look Like?

Recent times have been advantageous for Aurum PropTech as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Aurum PropTech.

Do Revenue Forecasts Match The High P/S Ratio?

Aurum PropTech'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.

Retrospectively, the last year delivered an exceptional 50% gain to the company's top line. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 48% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 16% growth forecast for the broader industry.

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

The Bottom Line On Aurum PropTech's P/S

Shares in Aurum PropTech have seen a strong upwards swing lately, which has really helped boost its P/S figure. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Aurum PropTech's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 3 warning signs for Aurum PropTech (2 can't be ignored!) that you need to take into consideration.

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.

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