Revenues Tell The Story For SpiderPlus & Co. (TSE:4192) As Its Stock Soars 30%

SpiderPlus & Co. (TSE:4192) shares have continued their recent momentum with a 30% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 28% over that time.

Following the firm bounce in price, you could be forgiven for thinking SpiderPlus is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 4.5x, considering almost half the companies in Japan's Software industry have P/S ratios below 2.1x. 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 SpiderPlus

How SpiderPlus Has Been Performing

Recent times have been advantageous for SpiderPlus as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is SpiderPlus' Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like SpiderPlus' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 27% last year. The latest three year period has also seen an excellent 85% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 42% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.

With this in mind, it's not hard to understand why SpiderPlus' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On SpiderPlus' P/S

SpiderPlus' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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 SpiderPlus maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for SpiderPlus that you should be aware of.

If these risks are making you reconsider your opinion on SpiderPlus, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.