Revenues Tell The Story For Creotech Instruments S.A. (WSE:CRI) As Its Stock Soars 28%

Creotech Instruments S.A. (WSE:CRI) shareholders have had their patience rewarded with a 28% share price jump in the last month. The last month tops off a massive increase of 129% in the last year.

Since its price has surged higher, you could be forgiven for thinking Creotech Instruments is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 9.4x, considering almost half the companies in Poland's Aerospace & Defense industry have P/S ratios below 2.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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View our latest analysis for Creotech Instruments

What Does Creotech Instruments' P/S Mean For Shareholders?

Creotech Instruments certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Creotech Instruments will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Creotech Instruments?

In order to justify its P/S ratio, Creotech Instruments would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 125%. The latest three year period has also seen an excellent 185% 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.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 15% shows it's noticeably more attractive.

In light of this, it's understandable that Creotech Instruments' P/S sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does Creotech Instruments' P/S Mean For Investors?

The strong share price surge has lead to Creotech Instruments' P/S soaring as well. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It's no surprise that Creotech Instruments can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

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

If these risks are making you reconsider your opinion on Creotech Instruments, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.