Investors Appear Satisfied With NRC Group ASA's (OB:NRC) Prospects As Shares Rocket 29%

Despite an already strong run, NRC Group ASA (OB:NRC) shares have been powering on, with a gain of 29% in the last thirty days. The annual gain comes to 143% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, there still wouldn't be many who think NRC Group's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in Norway's Construction industry is similar at about 0.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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View our latest analysis for NRC Group

What Does NRC Group's Recent Performance Look Like?

NRC Group could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is NRC Group's Revenue Growth Trending?

In order to justify its P/S ratio, NRC Group would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 2.5%. The latest three year period has also seen a 7.5% overall rise in revenue, aided somewhat by its short-term performance. 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 two analysts covering the company suggest revenue should grow by 5.0% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 4.6% each year, which is not materially different.

With this in mind, it makes sense that NRC Group's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does NRC Group's P/S Mean For Investors?

Its shares have lifted substantially and now NRC Group's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A NRC Group's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Construction industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

You should always think about risks. Case in point, we've spotted 1 warning sign for NRC Group you should be aware of.

If you're unsure about the strength of NRC Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.