Revenues Tell The Story For SaltX Technology Holding AB (publ) (STO:SALT B) As Its Stock Soars 29%

SaltX Technology Holding AB (publ) (STO:SALT B) shares have continued their recent momentum with a 29% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 12% is also fairly reasonable.

Since its price has surged higher, when almost half of the companies in Sweden's Machinery industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider SaltX Technology Holding as a stock not worth researching with its 7x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for SaltX Technology Holding

How SaltX Technology Holding Has Been Performing

With revenue growth that's exceedingly strong of late, SaltX Technology Holding has been doing very well. 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. If not, then existing shareholders might be a little nervous about the viability of the share price.

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 SaltX Technology Holding's earnings, revenue and cash flow.

How Is SaltX Technology Holding's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like SaltX Technology Holding's to be considered reasonable.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 2.4% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why SaltX Technology Holding is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What Does SaltX Technology Holding's P/S Mean For Investors?

The strong share price surge has lead to SaltX Technology Holding's P/S soaring as well. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of SaltX Technology Holding revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Having said that, be aware SaltX Technology Holding is showing 4 warning signs in our investment analysis, and 2 of those are a bit concerning.

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.