TenderHut S.A.'s (WSE:THG) Shares Leap 63% Yet They're Still Not Telling The Full Story

TenderHut S.A. (WSE:THG) shareholders would be excited to see that the share price has had a great month, posting a 63% gain and recovering from prior weakness. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 66% share price drop in the last twelve months.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about TenderHut's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the IT industry in Poland is also close to 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for TenderHut

How Has TenderHut Performed Recently?

The revenue growth achieved at TenderHut over the last year would be more than acceptable for most companies. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on TenderHut will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for TenderHut, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is TenderHut's Revenue Growth Trending?

In order to justify its P/S ratio, TenderHut would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.9% last year. Revenue has also lifted 29% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 5.6%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that TenderHut is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On TenderHut's P/S

TenderHut's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We didn't quite envision TenderHut's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. 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.

It is also worth noting that we have found 3 warning signs for TenderHut that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.