Lubawa S.A. (WSE:LBW) Stock Rockets 28% But Many Are Still Ignoring The Company

Lubawa S.A. (WSE:LBW) shares have continued their recent momentum with a 28% gain in the last month alone. The last month tops off a massive increase of 105% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Lubawa's price-to-sales (or "P/S") ratio of 1.6x is worth a mention when it essentially matches the median P/S in Poland's Aerospace & Defense industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Lubawa

What Does Lubawa's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, Lubawa has been doing very well. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on Lubawa will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Lubawa's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 93% gain to the company's top line. The latest three year period has also seen an excellent 121% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 15% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Lubawa's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Lubawa's P/S Mean For Investors?

Lubawa's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Lubawa currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Lubawa with six simple checks.

If these risks are making you reconsider your opinion on Lubawa, 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.