Pyrum Innovations AG (OB:PYRUM) Looks Just Right With A 44% Price Jump

Pyrum Innovations AG (OB:PYRUM) shareholders would be excited to see that the share price has had a great month, posting a 44% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 22% in the last twelve months.

After such a large jump in price, Pyrum Innovations' price-to-sales (or "P/S") ratio of 9.2x might make it look like a strong sell right now compared to other companies in the Commercial Services industry in Norway, where around half of the companies have P/S ratios below 3.9x and even P/S below 1.8x are quite common. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Pyrum Innovations

How Pyrum Innovations Has Been Performing

Pyrum Innovations could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Pyrum Innovations' Revenue Growth Trending?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Despite the lack of growth, the company was still able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it has slowed to such an extent.

Turning to the outlook, the next three years should generate growth of 40% per annum as estimated by the dual analysts watching the company. That's shaping up to be materially higher than the 7.4% per annum growth forecast for the broader industry.

With this information, we can see why Pyrum Innovations is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

The strong share price surge has lead to Pyrum Innovations' P/S soaring as well. 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.

Our look into Pyrum Innovations shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for Pyrum Innovations (1 can't be ignored!) 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.