S.C. Prebet Aiud S.A.'s (BVB:PREB) P/S Is Still On The Mark Following 27% Share Price Bounce

The S.C. Prebet Aiud S.A. (BVB:PREB) share price has done very well over the last month, posting an excellent gain of 27%. Looking back a bit further, it's encouraging to see the stock is up 58% in the last year.

After such a large jump in price, when almost half of the companies in Romania's Basic Materials industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider S.C. Prebet Aiud as a stock probably not worth researching with its 2.2x 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 S.C. Prebet Aiud

What Does S.C. Prebet Aiud's P/S Mean For Shareholders?

Recent times have been quite advantageous for S.C. Prebet Aiud as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Although there are no analyst estimates available for S.C. Prebet Aiud, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is S.C. Prebet Aiud's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as S.C. Prebet Aiud's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 33% last year. Pleasingly, revenue has also lifted 44% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 4.9% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's understandable that S.C. Prebet Aiud's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Key Takeaway

S.C. Prebet Aiud shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 S.C. Prebet Aiud maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for S.C. Prebet Aiud that you need to be mindful 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.