Carasent ASA's (OB:CARA) 32% Jump Shows Its Popularity With Investors

The Carasent ASA (OB:CARA) share price has done very well over the last month, posting an excellent gain of 32%. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.6% over the last year.

After such a large jump in price, you could be forgiven for thinking Carasent is a stock not worth researching with a price-to-sales ratios (or "P/S") of 4.4x, considering almost half the companies in Norway's Healthcare Services industry have P/S ratios below 3.5x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Carasent

What Does Carasent's Recent Performance Look Like?

Carasent certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might 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 Carasent will help you uncover what's on the horizon.

How Is Carasent's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. The strong recent performance means it was also able to grow revenue by 246% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 14% per annum during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.4% each year, which is noticeably less attractive.

With this information, we can see why Carasent is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Carasent's P/S

Carasent's P/S is on the rise since its shares have risen strongly. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Carasent shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

Having said that, be aware Carasent is showing 3 warning signs in our investment analysis, and 2 of those don't sit too well with us.

If you're unsure about the strength of Carasent'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.