Revenues Tell The Story For Neptis Spólka Akcyjna (WSE:YAN) As Its Stock Soars 36%

Neptis Spólka Akcyjna (WSE:YAN) shareholders have had their patience rewarded with a 36% share price jump in the last month. Looking further back, the 15% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

After such a large jump in price, when almost half of the companies in Poland's Communications industry have price-to-sales ratios (or "P/S") below 1.1x, you may consider Neptis Spólka Akcyjna as a stock probably not worth researching with its 2.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Neptis Spólka Akcyjna

What Does Neptis Spólka Akcyjna's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Neptis Spólka Akcyjna over the last year, which is not ideal at all. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Neptis Spólka Akcyjna's earnings, revenue and cash flow.

How Is Neptis Spólka Akcyjna's Revenue Growth Trending?

In order to justify its P/S ratio, Neptis Spólka Akcyjna would need to produce impressive growth in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.0%. Even so, admirably revenue has lifted 133% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

This is in contrast to the rest of the industry, which is expected to grow by 2.4% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why Neptis Spólka Akcyjna is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Final Word

Neptis Spólka Akcyjna's P/S is on the rise since its shares have risen strongly. 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.

It's no surprise that Neptis Spólka Akcyjna 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 need to take note of risks, for example - Neptis Spólka Akcyjna has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.