IRIS Business Services Limited (NSE:IRIS) Looks Just Right With A 25% Price Jump

IRIS Business Services Limited (NSE:IRIS) shares have continued their recent momentum with a 25% gain in the last month alone. This latest share price bounce rounds out a remarkable 322% gain over the last twelve months.

After such a large jump in price, IRIS Business Services may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 9.9x, since almost half of all companies in the Software industry in India have P/S ratios under 5.5x and even P/S lower than 2x are not unusual. 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.

Check out our latest analysis for IRIS Business Services

What Does IRIS Business Services' P/S Mean For Shareholders?

IRIS Business Services certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

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

IRIS Business Services' 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.

Taking a look back first, we see that the company grew revenue by an impressive 38% last year. The strong recent performance means it was also able to grow revenue by 98% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's understandable that IRIS Business Services' P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What Does IRIS Business Services' P/S Mean For Investors?

IRIS Business Services' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

It's no surprise that IRIS Business Services can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for IRIS Business Services that 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.