Investors Still Waiting For A Pull Back In SC Foraj Sonde SA Craiova (BVB:FOSB)

When you see that almost half of the companies in the Energy Services industry in Romania have price-to-sales ratios (or "P/S") below 1x, SC Foraj Sonde SA Craiova (BVB:FOSB) looks to be giving off some sell signals with its 2x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for SC Foraj Sonde SA Craiova

What Does SC Foraj Sonde SA Craiova's P/S Mean For Shareholders?

Recent times have been quite advantageous for SC Foraj Sonde SA Craiova as its revenue has been rising very briskly. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. 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 SC Foraj Sonde SA Craiova's earnings, revenue and cash flow.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as SC Foraj Sonde SA Craiova's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 91% gain to the company's top line. The latest three year period has also seen an excellent 124% overall rise in revenue, aided by its short-term performance. 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 4.1%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in consideration, it's not hard to understand why SC Foraj Sonde SA Craiova's P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Final Word

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.

It's no surprise that SC Foraj Sonde SA Craiova 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. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 4 warning signs for SC Foraj Sonde SA Craiova (3 make us uncomfortable!) that you should be aware of.

If you're unsure about the strength of SC Foraj Sonde SA Craiova's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.