Nextbike Polska S.A.'s (WSE:NXB) 28% Share Price Surge Not Quite Adding Up

The Nextbike Polska S.A. (WSE:NXB) share price has done very well over the last month, posting an excellent gain of 28%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 12% in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Nextbike Polska's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in Poland's Transportation industry is similar at about 0.6x. 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 Nextbike Polska

How Nextbike Polska Has Been Performing

For example, consider that Nextbike Polska's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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 Nextbike Polska's earnings, revenue and cash flow.

How Is Nextbike Polska's Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 9.4% shows it's noticeably less attractive.

With this in mind, we find it intriguing that Nextbike Polska's P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What We Can Learn From Nextbike Polska's P/S?

Nextbike Polska appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of Nextbike Polska revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

Before you settle on your opinion, we've discovered 3 warning signs for Nextbike Polska that you should be aware of.

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.