Why Investors Shouldn't Be Surprised By Aurum PropTech Limited's (NSE:AURUMPP1) 25% Share Price Surge

Aurum PropTech Limited (NSE:AURUMPP1) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Since its price has surged higher, Aurum PropTech's price-to-sales (or "P/S") ratio of 10x might make it look like a strong sell right now compared to other companies in the Software industry in India, where around half of the companies have P/S ratios below 5.3x and even P/S below 2x are quite common. 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.

View our latest analysis for Aurum PropTech

How Aurum PropTech Has Been Performing

Aurum PropTech certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Aurum PropTech's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Aurum PropTech's Revenue Growth Trending?

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.

If we review the last year of revenue growth, the company posted a terrific increase of 50%. Still, revenue has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 48% over the next year. That's shaping up to be materially higher than the 16% growth forecast for the broader industry.

In light of this, it's understandable that Aurum PropTech's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Aurum PropTech's P/S?

The strong share price surge has lead to Aurum PropTech's P/S soaring as well. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into Aurum PropTech shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 2 warning signs for Aurum PropTech you should be aware of.

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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