After Leaping 30% PCL Technologies, Inc. (TWSE:4977) Shares Are Not Flying Under The Radar

PCL Technologies, Inc. (TWSE:4977) shares have continued their recent momentum with a 30% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 79%.

Following the firm bounce in price, given around half the companies in Taiwan's Communications industry have price-to-sales ratios (or "P/S") below 2.4x, you may consider PCL Technologies as a stock to avoid entirely with its 12.7x 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.

See our latest analysis for PCL Technologies

How Has PCL Technologies Performed Recently?

PCL Technologies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think PCL Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, PCL Technologies would need to produce outstanding growth that's well in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 63%. This means it has also seen a slide in revenue over the longer-term as revenue is down 69% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 66% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 21%, which is noticeably less attractive.

In light of this, it's understandable that PCL Technologies' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On PCL Technologies' P/S

PCL Technologies' P/S has grown nicely over the last month thanks to a handy boost in the share price. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into PCL Technologies shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for PCL Technologies (2 don't sit too well with us!) that you should be aware of before investing here.

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.