Further Upside For Xplora Technologies AS (OB:XPLRA) Shares Could Introduce Price Risks After 25% Bounce

Despite an already strong run, Xplora Technologies AS (OB:XPLRA) shares have been powering on, with a gain of 25% in the last thirty days. The last month tops off a massive increase of 133% in the last year.

Although its price has surged higher, Xplora Technologies' price-to-sales (or "P/S") ratio of 1.8x might still make it look like a strong buy right now compared to the wider Electronic industry in Norway, where around half of the companies have P/S ratios above 3.9x and even P/S above 11x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Xplora Technologies

How Xplora Technologies Has Been Performing

Xplora Technologies certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Xplora Technologies.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Xplora Technologies would need to produce anemic growth that's substantially trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 19% last year. The latest three year period has also seen an excellent 115% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 15% each year as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 11% each year, which is noticeably less attractive.

With this information, we find it odd that Xplora Technologies is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Xplora Technologies' P/S?

Even after such a strong price move, Xplora Technologies' P/S still trails the rest of 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.

A look at Xplora Technologies' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Plus, you should also learn about this 1 warning sign we've spotted with Xplora Technologies.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.