There's Reason For Concern Over Wilson Learning Worldwide Inc.'s (TSE:9610) Massive 87% Price Jump

The Wilson Learning Worldwide Inc. (TSE:9610) share price has done very well over the last month, posting an excellent gain of 87%. Taking a wider view, although not as strong as the last month, the full year gain of 18% is also fairly reasonable.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Wilson Learning Worldwide's P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Professional Services industry in Japan is also close to 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Our free stock report includes 4 warning signs investors should be aware of before investing in Wilson Learning Worldwide. Read for free now.

See our latest analysis for Wilson Learning Worldwide

How Has Wilson Learning Worldwide Performed Recently?

For example, consider that Wilson Learning Worldwide's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Wilson Learning Worldwide's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Wilson Learning Worldwide?

The only time you'd be comfortable seeing a P/S like Wilson Learning Worldwide's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 29%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 7.3% shows it's noticeably less attractive.

With this information, we find it interesting that Wilson Learning Worldwide is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On Wilson Learning Worldwide's P/S

Wilson Learning Worldwide appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

We've established that Wilson Learning Worldwide's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Wilson Learning Worldwide (3 are a bit unpleasant) 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.