Tesmec S.p.A. (BIT:TES) Stock Rockets 26% But Many Are Still Ignoring The Company

Despite an already strong run, Tesmec S.p.A. (BIT:TES) shares have been powering on, with a gain of 26% in the last thirty days. The annual gain comes to 105% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, it would still be understandable if you think Tesmec is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.3x, considering almost half the companies in Italy's Machinery industry have P/S ratios above 0.8x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Tesmec

What Does Tesmec's Recent Performance Look Like?

Recent times have been advantageous for Tesmec as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Tesmec will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Tesmec?

The only time you'd be truly comfortable seeing a P/S as low as Tesmec's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 13% gain to the company's revenues. Revenue has also lifted 13% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 8.2% per annum over the next three years. That's shaping up to be materially higher than the 5.7% per year growth forecast for the broader industry.

With this information, we find it odd that Tesmec is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Despite Tesmec's share price climbing recently, its P/S still lags most other companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A look at Tesmec's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You need to take note of risks, for example - Tesmec has 3 warning signs (and 2 which can't be ignored) we think you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.