The Market Lifts Xplora Technologies AS (OB:XPLRA) Shares 29% But It Can Do More

Xplora Technologies AS (OB:XPLRA) shareholders are no doubt pleased to see that the share price has bounced 29% in the last month, although it is still struggling to make up recently lost ground. The annual gain comes to 133% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, Xplora Technologies may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.7x, considering almost half of all companies in the Electronic industry in Norway have P/S ratios greater than 3.6x and even P/S higher than 11x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for Xplora Technologies

How Xplora Technologies Has Been Performing

Recent times have been advantageous for Xplora Technologies as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is Xplora Technologies' Revenue Growth Trending?

Xplora Technologies' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. The latest three year period has also seen an excellent 89% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 40% per annum during the coming three years according to the sole analyst following the company. That's shaping up to be materially higher than the 9.9% each year growth forecast for the broader industry.

With this information, we find it odd that Xplora Technologies is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Despite Xplora Technologies' share price climbing recently, its P/S still lags most other companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

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.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Xplora Technologies with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Xplora Technologies' 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.