S.C. Electromontaj Carpati S.A. (BVB:ELJA) Stock Rockets 25% But Many Are Still Ignoring The Company

S.C. Electromontaj Carpati S.A. (BVB:ELJA) shareholders are no doubt pleased to see that the share price has bounced 25% in the last month, although it is still struggling to make up recently lost ground. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about S.C. Electromontaj Carpati's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Construction industry in Romania is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've discovered 3 warning signs about S.C. Electromontaj Carpati. View them for free.

Check out our latest analysis for S.C. Electromontaj Carpati

What Does S.C. Electromontaj Carpati's Recent Performance Look Like?

S.C. Electromontaj Carpati has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For S.C. Electromontaj Carpati?

There's an inherent assumption that a company should be matching the industry for P/S ratios like S.C. Electromontaj Carpati's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.9% last year. This was backed up an excellent period prior to see revenue up by 32% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 4.9%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that S.C. Electromontaj Carpati is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On S.C. Electromontaj Carpati's P/S

S.C. Electromontaj Carpati appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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've established that S.C. Electromontaj Carpati currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. 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.

And what about other risks? Every company has them, and we've spotted 3 warning signs for S.C. Electromontaj Carpati you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.