Enter Air Sp. z o.o. (WSE:ENT) Soars 28% But It's A Story Of Risk Vs Reward

Despite an already strong run, Enter Air Sp. z o.o. (WSE:ENT) shares have been powering on, with a gain of 28% in the last thirty days. The last month tops off a massive increase of 121% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Enter Air Sp. z o.o's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Airlines industry in Poland is also close to 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Enter Air Sp. z o.o

What Does Enter Air Sp. z o.o's Recent Performance Look Like?

The revenue growth achieved at Enter Air Sp. z o.o 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 Enter Air Sp. z o.o 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 Enter Air Sp. z o.o will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Enter Air Sp. z o.o?

In order to justify its P/S ratio, Enter Air Sp. z o.o would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 20% gain to the company's top line. The latest three year period has also seen an excellent 265% 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 9.7% shows it's noticeably more attractive.

In light of this, it's curious that Enter Air Sp. z o.o'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.

The Key Takeaway

Enter Air Sp. z o.o appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

We've established that Enter Air Sp. z o.o 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. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Enter Air Sp. z o.o, and understanding should be part of your investment process.

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.